The 

Panama  Canal  Tolls 
Controversy 


OR 


A  Statement  of  the  Reasons  for  the 
Adoption  and  Maintenance  of  the 
Traditional  American  Policy  in  the 
Management  of  the  Panama  Canal 

WITH    INTRODUCTIONS    BT 

William  J.  Bryan,  Secretary  of  State 

Oscar  S.  Straus,  Member  of  the  Hague  Court 

Wm,  Hughes,  United  States  Senator 

By 
HUGH  GORDON  MILLER 

of  the  New  York  Bar,  former  Special  Assistant 
to  the  Attornej'-General  of  the  United  States 

and 

JOSEPH  C.  FREEHOFF,  PH.  D. 

Statistician  with  the  Public  Service  Commission 
for  New  York  City 


BOSTON 

Chapple  Publishing  Company,  Ltd. 
1914  .  ,     ,  ,      .-- 


COPYRIGHT,  1914 


Chapplb  Publishino  Compant,  Limited 
Boston,  Massachusetts 


-Rills' 


to 
PRESIDENT  WOODROW  WILSON 

(DEMOCRAT) 

whx)  in  his  efforts  to  secure  the  repeal  of  the  tolls- 
exemption  clause  of  the  Panama  Canal  act,  took 
and  successfully  maintained  as  exalted  moral, 
courageous  and  patriotic  a  position  as  was  ever 
taken  and  maintained  by  any  Executive  of  any 
nation; 

SENATOR  ELIHU  ROOT 

(REPUBLICAN) 

former  Secretary  of  State  and  authority  on 
international  questions,  whose  persistent  efforts 
and  unanswerable  arguments  contributed  most  in 
support  of  the  President  to  secure  the  repeal  of 
the  foregoing  statute;  and 

HON.  OSCAR  S.  STRAUS 

(PROGRESSIVE) 

Minister  and  late  Ambassador  to  Turkey; 
member  of  the  Permanent  Court  of  Arbitration 
at  the  Hagu€,  succeeding  Benjamin  Harrison,  ex- 
President;  lawyer,  author,  statesman  and  author- 
ity on  matters  of  diplomacy,  for  using  his  great 
influence  in  favor  of  the  repeal  of  tlie  foregoing 
clause  repugnant  to  the  Hay-Pauncefote  Treaty. 


CONTENTS 


Page 

Introduction  by  William  J.  Bryan xxi 

Introduction  by  Oscar  S.  Straus xxiii 

Introduction  by  William  Hughes xxvii 

Chapter     I. — The  Meaning  of  the  Hay-Pauncefote  Treaty  1 

Chapter    II. — Legal  and  Moral  Aspects  of  Tolls  Exemption  71 

Chapter  III. — The   Financial  Aspects  of   Tolls   Exemption  140 


APPENDICES 

Page 

(a)  The  Claj-'ton-Bulwer  Treaty 171 

(6)  The  Suez  Canal  Convention              178 

(c)  The  Hay-Pauncefote  Treaty  of  1900         ....  185 

(d)  The  Hay-Pauncefot«  Treaty  of  1901         ....  189 

(e)  Treaty  with  Panama 193 


i 


t 


PREFACE 

THIS  work  was  undertaken  for  the  purpose  of 
showing  the  meaning  of  the  Hay-Pauncefote 
treaty;  and,  while  the  subject  is  uppermost  in 
public  attention,  to  give  that  meaning  the  widest  possible 
publicity. 

We  concluded,  upon  examination  of  the  record  after 
President  Wilson's  brief  message  asking  the  Congress  to 
repeal  the  tolls-exemption  clause  of  the  Panama  Canal 
act,  that  many  honest,  sincere  and  patriotic  American 
citizens  had,  as  we  ourselves  had  before  examining  the 
subject  in  a  judicial  frame  of  mind,  assumed  basic 
conditions  contrary  to  the  actual  record,  and  that 
many  had  argued  upon  popular  misconceptions  of  vital 
facts. 

We  aimed  to  present  a  conclusive  statement  of  facts 
demonstrating  that  the  United  States  cannot  grant  free 
transportation  through  the  Panama  Canal  to  its  coastwise 
and  foreign  shipping  without  violating  the  Hay-Paunce- 
fote treaty. 

This  work  is  })rimarily  a  source  book.  Chapter  I 
contains  the  traditional  documents  and  the  sections  of 
other  treaties  which  assist  one  in  ascertaining  the  real 
meaning  of  the  Hay-Pauncefote  treaty.  The  letters  of 
the  negotiators  of  the  treaty  supplement  these  data. 
By  comments  and  the  use  of  quotations,  we  aimed  to 
weave  this  material  into  a  connected  whole  so  that  the 


viii  Preface 

real  meaning  of  the  Hay-Pauncefote  treaty  would  stand 
out  distinctly. 

In  Chapter  II  we  assembled  able  arguments  of  public 
men  in  favor  of  the  repeal  of  the  tolls-exemption  clause  of 
the  Panama  Canal  act.  This  Chapter  and  Chapter  I 
are  primarily  designed  to  be  sources  of  documents,  ex- 
cerpts from  treaties,  letters  and  arguments  by  others. 
It  is  believed  that  therein  are  assembled  all  the  docu- 
ments and  arguments  necessary  to  arrive  at  a  correct 
conclusion.  These  documents  and  arguments  are  widely 
scattered.  They  are  here  assembled  in  one  volume  for 
the  convenience  of  those  desiring  a  correct  understanding 
of  this  memorable  controversy. 

Chapters  I  and  II  contain  the  essential  documents 
bearing  on  the  meaning  of  the  treaty  and  excerpts  from 
con\'incing  arguments  in  favor  of  the  repeal  of  the  tolls- 
exemption  clause  of  the  Panama  Canal  act.  These  are 
woven  into  a  connected  statement  thus  combining  the 
source  book  and  connected  argument  method.  It  seemed 
to  the  authors  that  this  would  be  the  most  effective 
method  of  presenting  the  data  having  a  bearing  on  the 
meaning  of  the  treaty  and  the  arguments  showing  that 
meaning. 

Owing  to  the  nature  of  the  material  used  and  the 
manner  of  using  it,  it  was  not  always  possible  to  give 
adequate  credit.  Readers  of  the  able  speeches  of  Senators 
Root,  McCumber,  Burton  and  Representative  Stevens 
will  readily  see  that  great  use  has  been  made  of  their 
arguments.  The  addresses  of  these  three  Senators  and 
of  Representative  Stevens  are  the  principal  source  of  the 
secondary  material  used  in  this  work. 


Preface  ix 

In  Chapter  III  we  have  supplemented  the  meager 
data  on  the  financial  aspects  of  the  question  by  an  ex- 
tended original  discussion  of  the  business  and  public 
utility  aspect  of  the  Panama  Canal.  The  argument  is 
based  on  the  fact  that  our  traditional  policy,  the  clause 
of  the  treaty,  "Such  conditions  and  charges  of  traffic 
shall  be  just  and  equitable,"  and  the  method  adopted  in 
securing  title  to  the  Canal  Zone  obligate  the  United 
States  to  treat  this  international  waterway  as  a  public 
utility.  The  financial  and  commercial  policy  that  the 
United  States  must  adopt  to  conform  thereto  is  outlined. 
It  is  shown  that  this  policy  is  in  complete  harmony  with 
the  Hay-Pauncefote  treaty. 

The  work  contains  some  repetition.  Because  of  the 
number  of  sources  from  which  the  material  used  was 
drawn,  repetition  could  not  have  been  avoided.  It  would 
not  have  been  desirable  to  have  avoided  it  entirely  if 
it  could  have  been  easily  done.  All  minds  are  not  equally 
mature  and  so  it  may  well  be  that  the  method  of  here  a 
little  and  there  a  little  from  different  standpoints  is  the 
way  of  correct  understanding. 

Fundamental  principles  and  important  documents 
are  involved  in  the  consideration  of  a  question  like  this, 
and,  as  they  have  a  bearing  on  the  various  standpoints 
from  which  the  question  was  considered,  repetition  was 
inevitable.  We  aimed  to  assemble  that  which  would  be 
most  effective  from  many  sources  and  to  weave  it  into  a 
connected  whole.  This  makes  accessible  in  a  single 
volume  all  that  is  worth  while  that  has  any  bearing  on  the 
tolls-exemption  controversy. 


X  Preface 

It  is  customary  for  quotations  to  be  printed  solid  in 
order  to  set  them  apart  from  the  context.  It  was  not 
found  feasible  to  do  so  in  this  work  owing  to  the  extent 
to  which  quotations  have  been  used.  Quotations  within 
quotations  are  printed  solid  in  order  to  difiPerentiate 
them  from  the  quotations  of  which  they  are  a  part. 

This  work  was  well  advanced  before  the  tolls-exemp- 
tion clause  of  the  Panama  Canal  act  was  repealed.  Its 
tone  is  argumentative — urging  repeal.  The  same  argu- 
ments will  apply  if  any  attempt  is  made  to  re-enact  the 
clause  or  a  similar  one.  That  is  why  this  work  was  under- 
taken and  prosecuted  to  its  final  conclusion — publication. 
Its  sole  object  is  opposition  to  tolls-exemption  inasmuch 
as  it  would  violate  the  Hay-Pauncefote  treaty. 

The  tolls-exemption  clause  of  the  Panama  Canal  act 
is  repealed.  This  is  primarily  due  to  the  efforts  of  those 
members  of  the  Democratic  Party  who  loyally  supported 
the  President.  Paramount  credit  is  due  to  them.  Able 
addresses  in  favor  of  the  repeal  of  this  statute  were  de- 
livered by  them  in  the  Senate  and  in  the  House.  To  have 
used  excerpts  from  these  speeches  would  have  resulted 
in  needless  repetition.  Suffice  it  to  say  that  excerpts 
therefrom  could  have  been  used  in  place  of  arguments 
actually  used  without  impairment  of  the  strength  of  the 
narrative. 

The  tolls-exemj)tion  clause  of  the  Panama  Canal  act 
was  clearly  in  violation  of  the  Hay-Pauncefote  treaty, 
and  reversed  the  traditional  policy  of  the  United  States. 
This  work  was  prepared  in  the  hope  that  it  would  assist 
in  keeping  tolls-exemption  for  our  coastwise  and  foreign 
commerce  in  a  state  of  innocuous  desuetude. 


Preface  xi 

During  the  McKinley  administration  the  Hay-Paunce- 
fote  treaty  was  negotiated.  Before  it  was  signed  Roose- 
velt had  become  President.  His  iSrst  pubHc  utterance 
as  President  was  to  the  effect  that  he  would  keep  unbroken 
the  policies  of  William  McKinley.  Roosevelt  kept  the 
faith.  The  McKinley-Hay  canal  policy  was  kept  un- 
broken. 

Observe  Roosevelt's  own  statement  in  its  proper 
setting: 

Mr.  Hay,  in  transmitting  the  Hay-Pauncefote  treaty 
to  the  President,  writes: 

"I  submit  for  your  consideration  *  *  *  a  convention 
*  *  *  to  remove  any  objection  which  may  arise  out  of 
the  *  *  *  Clayton-Bulwer  treaty  *  *  *  without  im- 
pairing the  ^general  principle''  of  neutralization  established 
in  Article  8  of  that  convention." 

President  Roosevelt,  in  transmitting  the  treaty  to 
the  Senate,  says: 

"I  transmit,  for  the  advice  and  consent  of  the  Senate 
to  its  ratification,  a  convention  signed  November  18, 
1901,  *  *  *  to  remove  any  objection  which  may  arise 
out  of  the  convention  of  April  19,  1850,  *  *  *  to  the 
construction  of  §uch  canal  under  the  auspices  of  the 
Government  of  the  United  States  without  impairing 
the  'general  principle"  of  neutralization  established  in 
Article  8  of  that  convention." 

The  following  is  the  ^'general  principle''  as  understood 
at  that  time  by  those  who  negotiated  the  treaty: 

"It  is  always  understood  by  the  United  States  and 
Great  Britain  that  the  parties  constructing  or  owning  the 
same — the  interoceanic  communication — shall  impose  no 


xii  Preface 

other  charges  or  conditions  of  traffic  thereupon  than  are 
just  and  equitable,  and  that  the  same  canals  or  railways, 
being  open  to  the  citizens  and  subjects  of  the  United 
States  and  Great  Britain  on  equal  terms,  shall  also  be 
open  on  like  terms  to  the  citizens  and  subjects  of  every 
other  state." 

The  "general  principle"  had  the  unqualified  approval 
of  President  McKinley.  Note  the  following  by  Secretary 
of  State  Hay: 

"The  President  was,  however,  not  only  willing  but 
desirous  that  'the  general  principle'  of  neutralization 
referred  to  in  the  preamble  of  this  treaty  should  be 
applicable  to  this  canal  now  intended  to  be  built,  not- 
withstanding any  change  of  sovereignty  or  of  international 
relations  of  the  territory  through  which  it  should  pass. 
This  'general  principle'  of  neutralization  had  always  in 
fact  been  insisted  upon  by  the  United  States." 

President  Roosevelt  kept  the  faith  as  stated  above. 
Note  the  following: 

President  Roosevelt,  in  submitting  the  second  Hay- 
Pauncefote  treaty,  said: 

"It  specifically  provides  that  the  United  States  alone 
shall  do  the  work  of  building  and  assume  the  responsi- 
bility of  safeguarding  the  canal  and  shall  regulate  its 
neutral  use  by  all  nations  on  terms  of  equality  without 
the  guaranty  of  interference  of  any  outside  nation  from 
any  quarter."  *  *  * 

Again,  he  says,  on  January  4,  1904,  in  a  special 
message: 

"*  *  *  Under  the  Hay-Pauncefote  treaty  it  was 
explicitly  provided  that  the  United  States  should  control, 


Preface  xiii 

police  and  protect  the  canal  which  was  to  be  built,  keeping 
it  open  for  the  vessels  of  all  nations  on  equal  terms.  The 
United  States  thus  assumes  the  position  of  guarantor  of 
the  canal  and  of  its  peaceful  use  by  all  the  world." 

In  a  note  by  Secretary  Hay  on  the  following  day,  he 
states : 

"  *  *  *  The  Clayton-Bulwer  treaty  was  conceived 
to  form  an  obstacle,  and  the  British  Government  there- 
fore agreed  to  abrogate  it,  the  United  States  only  prom- 
ising in  return  to  protect  the  canal  and  keep  it  open  on 
equal  terms  to  all  nations,  in  accordance  with  our  tradi- 
tional policy.''' 

The  meaning  of  the  Hay-Pauncefote  treaty  is  made 
clear  in  the  following  by  Secretary  Hay: 

"More  direct  and  convincing  is  the  evidence  of  Willis 
Fletcher  Johnson,  a  journalist  of  the  highest  standing, 
who  recalls  distinctly  a  conversation  with  Secretary  Hay 
in  1904  to  this  effect: 

"I  asked  Colonel  Hay  plumply  if  the  treaty  meant 
what  it  appeared  to  mean  on  its  face,  and  whether  the 
phrase,  'vessels  of  all  nations,'  was  intended  to  include 
our  o^Ti  shipping,  or  was  to  be  interpreted  as  meaning 
'all  other  nations.'  The  Secretary  smiled,  half  indul- 
gently, half  quizzically,  as  he  replied: 

"  'All  means  all.  The  treaty  was  not  so  long  that 
we  could  not  have  made  room  for  the  word  'other'  if  we 
had  understood  that  it  belonged  there.  'All  nations'  means 
all  nations,  and  the  United  States  is  certainly  a  nation.' 

"  'That  was  the  understanding  between  yourself  and 
Lord  Pauncefote  when  you  and  he  made  the  treaty.'' 
I  pursued. 


xiv  Preface 

"  *It  certainly  was,'  he  replied.  *It  was  the  under- 
standing of  both  Governments,  and  I  have  no  doubt 
that  the  Senate  realized  that  in  ratifying  the  second 
treaty  without  such  an  amendment  it  was  committing 
us  to  the  principle  of  giving  all  friendly  nations  equal 
privileges  in  the  canal  with  ourselves.  That  is  our  Golden 
Rule.'  " — Harvey. 

Ambassador  Choate  confirms  this  construction  of  the 
Hay-Pauncefote  treaty  in  the  following: 

"It  is  true  that  I  had  something  to  do  with  the  nego- 
tiation of  this  treaty.  In  the  summer  of  1901 — you  will 
remember  that  the  treaty  was  ratified  by  the  Senate  in 
November,  1901 — I  was  in  England  until  October  and  was 
in  almost  daily  contact  with  Lord  Pauncefote  and  was 
also  in  very  frequent  correspondence  with  Mr.  Hay, 
our  Secretary  of  State,  under  whom  I  was  acting. 

"As  the  lips  of  both  of  these  diplomatists  and  great 
patriots,  who  were  each  true  to  his  own  country,  and  each 
regardful  of  the  rights  of  others,  are  sealed  in  death,  I 
think  it  is  quite  proper  that  I  should  say  what  I  believe 
both  of  them,  if  they  were  here,  would  say  today,  that 
the  clause  in  the  Panama  Canal  bill  exempting  coast- 
wise American  shipping  from  the  payment  of  tolls  is  in 
direct  violation  of  the  treaty.  I  venture  to  say  now  that 
in  the  whole  course  of  the  negotiation  of  this  particular 
treaty,  no  claim,  no  suggestion,  was  made  that  there 
should  be  any  exemption  of  anybody." 

It  is  evident  that  Roosevelt  as  President,  John  Hay 
as  Secretary  of  State  and  Joseph  H.  Choate  as  Ambassa- 
dor to  Great  Britain  gave  Great  Britain  to  understand 
and  Great  Britain  did  understand  when  the  Hay-Paunce- 


Preface  xv 

fote  treaty  was  prepared  and  proclaimed  that  tlie  "'general 
principle''  found  in  Article  VIII  of  the  Clayton-Bulwer 
treaty  was  preserved  unim})aired. 

The  Roosevelt  administration  gave  Great  Britain 
to  understand  that  the  United  States  would  construct 
and  operate  the  canal  "for  the  benefit  of  mankind  on  equal 
terms  to  all"  as  the  mandatory  of  civilization.  The 
Taft  administration  sought  to  deprive  Great  Britain  of 
the  foregoing  right  by  the  tolls-exemption  clause  of  the 
Panama  Canal  act.  The  Wilson  administration  restored 
to  Great  Britain,  in  the  repeal  of  the  tolls-exemption 
clause  of  the  Panama  Canal  act,  her  rights  under  the  Hay- 
Pauncefote  treaty. 

President  Wilson  asked  this  of  Congress  in  the  following 
message,  worthy  of  the  occasion: 

"Gentlemen  of  the  Congress:  I  have  come  to  you 
upon  an  errand  which  can  be  very  briefly  performed,  but 
I  beg  that  you  will  not  measure  its  importance  by  the 
immber  of  sentences  in  which  I  state  it.  No  communi- 
cation I  have  addressed  to  the  Congress  carried  with  it 
graver  or  more  far-reaching  implications  as  to  the  interest 
of  the  country,  and  I  come  now  to  speak  upon  a  matter 
with  regard  to  which  I  am  charged  in  a  particular  degree, 
by  the  Constitution  itself,  with  personal  responsibility. 

"I  have  come  to  ask  you  for  the  repeal  of  that  provision 
of  the  Panama  Canal  act  of  August  24,  1912,  which  ex- 
empts vessels  engaged  in  the  coastwise  trade  of  the 
United  States  from  payment  of  tolls,  and  to  urge  upon  you 
the  justice,  the  wisdom,  and  the  large  policy  of  such  a 
repeal  with  the  utmost  earnestness  of  which  I  am 
capable. 


xvi  Preface 

"In  my  own  judgment,  very  fully  considered  and  maturely 
formed,  that  exemption  constitutes  a  mistaken  economic 
policy  from  every  point  of  view,  and  is,  moreover,  in  plain 
contravention  of  the  treaty  with  Great  Britain  concerning 
the  canal  concluded  on  November  18,  1901.  But  I  have 
not  come  to  urge  upon  you  my  personal  views.  I  have 
come  to  state  to  you  a  fact  and  a  situation.  Whatever 
may  be  our  own  differences  of  opinion  concerning  this 
much  debated  measure,  its  meaning  is  not  debated  out- 
side the  United  States.  Everywhere  else  the  language 
of  the  treaty  is  given  but  one  interpretation,  and  that 
interpretation  precludes  the  exemption  I  am  asking  you 
to  repeal.  We  consented  to  the  treaty;  its  language  we 
accepted,  if  we  did  not  originate  it;  and  we  are  too  big, 
too  powerful,  too  self-respecting  a  Nation  to  interpret 
with  a  too  strained  or  refined  reading  the  words  of  our  own 
promises  just  because  we  have  power  enough  to  give  us 
leave  to  read  them  as  we  please.  The  large  thing  to  do 
is  the  only  thing  we  can  afford  to  do,  a  voluntary  with- 
drawal from  the  position  everywhere  questioned  and  mis- 
understood. We  ought  to  reverse  our  action  without 
raising  the  question  whether  we  were  right  or  wrong,  and 
so  once  more  deserve  our  reputation  for  generosity  and  for 
the  redemption  of  every  obligation  without  quibble  or 
hesitation. 

"I  ask  this  of  you  in  support  of  the  foreign  policy  of  the 
administration.  I  shall  not  know  how  to  deal  with  other 
matters  of  even  greater  delicacy  and  nearer  consequence 
if  you  do  not  grant  it  to  me  in  ungrudging  measure." 

The  high  moral  purpose  of  this  memorable  state  paper 
is   recognized   abroad.     Sir   Edward    Grey,    the   British 


Preface  x\'ii 

Foreign  Secretary,  complemented  it  in  a  speech  in  tlie 
House  of  Commons.  In  the  course  of  his  remarks,  he 
exposed  misrepresentation,  and,  in  so  doing,  revealed  the 
exalted  sense  of  justice  of  our  President.  The  following 
excerpts  from  Sir  Edward  Grey's  speech  should  have  the 
widest  circulation: 

"It  is  due  to  the  President  of  the  United  States  and  to 
ourselves  that  I  should  so  far  as  possible  clear  away  that 
misrepresentation.  It  was  stated  in  some  quarters  that 
the  settlement  was  the  result  of  bargaining  or  diplomatic 
pressure.  Since  President  Wilson  came  into  office  no 
correspondence  has  passed,  and  it  ought  to  be  realized 
in  the  United  States  that  any  line  President  Wilson  has 
taken  was  not  because  it  was  our  line,  but  his  own. 

"President  Wilson's  attitude  was  not  the  result  of  any 
diplomatic  communication  since  he  has  come  into  power 
and  it  must  have  been  the  result  of  papers  already  pub- 
lished to  all  the  world. 

"It  has  not  been  done  to  please  us  or  in  the  interests 
of  good  relations,  but  I  beheve  from  a  much  greater 
motive — the  feeling  that  a  government  which  is  to  use  its 
influence  among  the  nations  to  make  relations  better 
must  never  when  the  occasion  arises  flinch  or  quail  from 
interpreting  treaty  rights  in  a  strictly  fair  spirit." 

The  following  is  in  harmony  therewith: 

"London,  July  4. — Viscount  Bryce,  former  British 
Ambassador  to  the  United  States,  speaking  at  the  Inde- 
pendence Day  dinner  of  the  American  Society,  held  at  the 
Savoy  tonight,  paid  a  high  tribute  to  President  Wilson. 
He  said: 


xviii  Preface 

"  'Courage  is  a  virtue  rare  among  politicians.  What 
we  have  all  admired  in  the  President  is  his  courage  in  the 
matter  of  the  canal  tolls.' 

"  'Absolutely  no  pressure  was  brought  to  bear  by 
Great  Britain  to  obtain  repeal  of  the  tolls-exemption 
clause  of  the  Panama  Canal  act,'  he  said.  He  (James 
Bryce)  had  told  his  Government  that  if  President  Wilson 
thought  it  right  to  repeal  the  clause  or  submit  the  matter 
to  arbitration  he  would  do  it. 

"Ambassador  Page  said  the  last  British  letter  to  the 
United  States  Government  relating  to  the  canal  was 
written  by  Ambassador  Bryce  before  the  end  of  the  Taft 
administration." 

President  Wilson's  attitude  toward  the  tolls-exemption 
clause  of  the  Panama  Canal  act  was  reaffirmed  in  his 
Fourth  of  July  address  at  Independence  Hall.  It  is 
reported  as  follows: 

"I  say  that  it  is  patriotic  sometimes  to  prefer  the  honor 
of  the  country  to  its  material  interest.  Would  you  rather 
be  deemed  by  all  nations  of  the  world  incapable  of  keeping 
your  treaty  obligations  in  order  that  you  might  have 
free  tolls  for  American  ships?  The  treaty  under  which 
we  gave  up  that  right  may  have  been  a  mistaken  treaty, 
but  there  was  no  mistake  about  its  meaning. 

"When  I  have  made  a  promise  as  a  man  I  try  to  keep 
it,  and  I  know  of  no  other  rule  permissible  to  a  nation. 
The  most  distinguished  nation  in  the  world  is  the  nation 
that  can  and  will  keep  its  promises  even  to  its  own  hurt. 
And  I  want  to  say,  parenthetically,  that  I  do  not  think 
anybody  was  hurt.  I  cannot  be  enthusiastic  for  sub- 
sidies to  a  monopoly,  but  let  those  who  are  enthusiastic 


Preface  xix 

for  subsidies  ask  themselves  whether  they  prefer  sub- 
sidies to  unsullied  honor." 

Tolls-exemptions  is  a  question  in  which  international 
and  not  domestic  considerations  are  controlling.  As 
such,  political  considerations  should  not  have  entered 
into  or  influenced  its  discussion.  Therefore,  a  work  of 
this  character  is  properly  prepared  by  persons  not  members 
of  President  Wilson's  party  but  who  are  in  complete 
agreement  \\4th  him.  The  authors  of  this  work  are  in 
complete  accord  with  the  President's  interpretation  of 
the  Hay-Pauncefote  treaty.  As  enrolled  members  of  the 
Progressive  Party,  they  were  also  politically  qualified 
for  the  undertaking.  This  is  one  reason  why  preference 
was  given,  in  the  use  of  quotations,  to  arguments  advanced 
by  members  of  the  Republican  Party. 

The  controlling  reason  was  the  fact  that  Senators 
Root,  Burton,  Lodge,  McCumber  and  Representative 
Stevens  were,  at  the  time,  in  an  official  way  in  touch  with 
negotiators  of  the  Hay-Pauncefote  treaty  and  had  first- 
hand knowledge  of  the  intent  of  the  negotiators.  They 
were  in  a  position  to  learn  the  truth  and  they  did. 

The  then  administration  was  Republican.  They  be- 
longed to  the  inner  political  circle  or  were  affiliated  with 
a  member  or  members  of  that  circle.  Therefore,  what  they 
say  in  support  of  the  tolls  policy  of  the  President  is  of  such 
importance  that  it  should  be  final  with  reasonable  men. 

This  work  is  published  for  the  purpose  of  showing 
that  the  Hay-Pauncefote  treaty  is  a  world-pact,  and,  as 
interpreted  by  Sir  Edward  Grey,  is  an  agreement  without 
a  flaw  as  far  as  concerns  all  parties  in  interest.  It  should 
be  continued  without  modification  as  long  as  the  Panama 


XX  Preface 

Canal  endures.  If  this  work  contributes  aught  to  secure 
this  end,  the  result  will  have  justified  its  publication. 

The  notable  introductions  to  this  work  by  Secretary- 
Bryan,  ex-Ambassador  Straus  and  Senator  Hughes  make 
this  book  to  an  appreciable  degree  their  handiwork. 
The  authors  share  with  them  whatever  merit  it  has  and 
whatever  success  it  may  attain. 

We  pause  to  record  our  deep  appreciation  for  courtesies 
shown  us  in  the  preparation  of  this  work  by  Senator 
Hughes  of  New  Jersey.  Words  cannot  adequately  ex- 
press the  extent  of  our  obligations  and  of  our  grateful- 
ness to  the  Senator. 


INTRODUCTION 


DEPARTMENT  OF  STATE, 
WASHINGTON, 

September  4,  1914. 

Hon.  Hugh  Gordon  Miller  and 

Professor  Joseph  C.  Freehoff, 

220  Broadway, 

New  York,  N.  Y. 
Gentlemen: — 

I  have  read  the  preface  to  your  proposed  volume  en- 
titled, "The  Panama  Canal  Tolls  Controversy,"  and  beg 
to  commend  both  the  purpose  and  the  style  of  the  work. 
From  the  outline  of  the  book's  contents,  as  set  forth  in 
the  preface,  I  feel  sure  that  the  publication  will  be  of 
great  value  to  the  public,  and  will  assist  American  citizens 
to  understand  the  merits  of  the  question. 

The  position  taken  by  the  President  on  the  tolls  ques- 
tion aroused  more  opposition  at  that  time  than  it  would 
arouse  today,  subsequent  events  having  completely  vindi- 
cated the  wisdom  of  his  action. 

The  enviable  position  which  our  nation  occupies 
today  is  due,  in  part,  to  the  fact  that  it  has  allowed  no 
doubt  to  exist  as  to  its  purpose  to  live  up  to  the  stipula- 
tions of  its  treaty. 


Introduction 


heavily  in  favor  of  the  repeal  of  the  free  tolls  law,  but 
these  were  less  important  than  those  which  affected  the 
international  standing  of  our  nation. 

A  government  must  be  above  suspicion  in  the  matter 
of  good  faith;  no  pecuniary  advantage,  even  where 
such  an  advantage  actually  exists,  can  for  a  moment 
justify  the  violation  of  a  treaty  obligation,  and  violation 
must  be  the  more  scrupulously  avoided  if  the  question 
is  one  which  is  not  to  be  submitted  to  arbitration. 

In  international  matters  the  question  is  not  whether 
we  are  ourselves  certain  of  our  Government's  purpose 
in  the  position  taken,  but  whether  other  nations,  also, 
have  confidence  in  our  rectitude. 

The  President  set  a  high  standard  and  the  support 
given  to  him  in  the  Senate  and  House  was  as  creditable 
to  Congress  as  it  was  complimentary  to  him.  The  popular 
approval  which  is  now  accorded  to  both  the  President 
and  Congress  on  this  subject  is  proof  positive  that  the 
people  can  be  trusted  to  pass  judgment  upon  the  merit 
of  international,  as  well  as  domestic,  questions. 

Your  book  will  be  a  reference  book  to  those  who  have 
already  informed  themselves,  while  it  will  furnish  in- 
struction to  those  who  have  not  heretofore  been  in  position 
to  sit  in  judgment  upon  the  principle  involved  and  the 
facts  adduced  in  support  of  the  action  taken. 


Very  truly  yours, 

(Signed)  WM.  J.  BRYAN. 


INTRODUCTION 


There  is  no  more  honorable  chapter  in  the  highly 
creditable  history  of  the  diplomacy  of  our  country  than 
the  repeal  of  the  PANAMA  TOLLS  ACT  under  the 
present  administration.  Being  a  controversy  affecting 
our  international  relations,  it  is  gratifying  that,  aside 
from  the  leadership  of  the  President,  the  repeal  was 
effected  not  solely  by  the  party  in  power,  but  by  the  help 
of  leaders  in  all  three  parties,  rising  above  the  plane  of 
partisan  politics  to  the  higher  reaches  of  broad  states- 
manship, guided  by  a  scrupulous  regard  for  our  inter- 
national character  in  accord  with  "a  decent  respect  for 
the  opinions  of  mankind,"  as  expressed  in  the  Declaration 
of  Independence. 

The  debates  in  Congress  upon  the  subject  of  repeal 
proved  to  be  of  a  quality  in  learning,  ability  and  elo- 
quence in  keeping  with  the  best  traditions  of  our  national 
legislature.  Some  of  the  leading  Democratic  members 
of  the  Senate  and  the  House  opposed  the  President's 
recommendations  for  the  repeal,  while  some  of  the  leading 
members  of  the  opposition  effectively  supported  the  Presi- 
dent. The  debates  in  Congress  and  the  discussion  by  dis- 
tinguished publicists  developed  three  distinct  points  of 
view.  Former  President  Taft,  who  when  President  ap- 
proved the  Panama  Act,  held  substantially  that  the  Act 
did  not  violate  our  treaty  obligations,  and  therefore  we 
had  a  right  to  exempt  our  ships  from  tolls.  A  similar  po- 
sition was  taken  by  Senator O'Gorman  and  Representative 


xxiv  Introduction 

Underwood,  the  Administration  leaders  in  the  Senate  and 
the  House,  and  other  prominent  Democrats,  some  of  whom 
took  the  ground  that  there  was  no  basis  for  arbitration 
because  the  question  was  clear  and  undoubted,  that  the 
provision  of  our  score  or  more  of  treaties  providing  for 
arbitration  when  the  construction  of  a  treaty  was  involved 
did  not  apply,  as  there  was  nothing  to  arbitrate. 

A  second  group  of  opponents  to  the  repeal  held  with 
former  President  Roosevelt,  who  will  be  recognized  in 
history  as  the  father  of  the  Panama  Canal,  and  whose 
former  action  and  justified  course,  when  all  the  facts  are 
taken  in  consideration,  free  from  partisan  bias,  made  it 
possible  for  us  to  build  the  Canal;  he  held,  while  we  have 
the  right  under  the  treaties  to  exempt  our  coastwise  ships 
from  toll,  yet,  as  the  Panama  Act  involved  the  construc- 
tion of  treaties,  it  was  our  duty  to  arbitrate  if  arbitration 
was  demanded  by  Great  Britain. 

A  third  group,  led  by  Senator  Root,  whose  speech  in 
the  Senate  will  be  treasured  as  a  classic  in  our  Congres- 
sional debates,  maintained  that  the  Panama  Act  was  so 
plainly  in  violation  of  our  treaty  obligations  both  in  letter 
and  in  spirit  as  confirmed  by  the  negotiators  and  the 
negotiations  of  the  Hay-Pauncefote  treaties,  that  it  was 
our  plain  duty  to  repeal  the  exemption  clause  of  the  Act. 
The  position  of  President  Wilson,  as  taken  in  his  Special 
Message  to  Congress,  placed  him  in  a  group  by  himself. 
In  his  appeal  on  moral  and  international  grounds  to 
Congress  he  said:  "The  large  thing  to  do  is  the  only 
thing  we  can  afford  to  do,  a  voluntary  withdrawal  from 
a  position  everywhere  quoted  and  misunderstood.  We 
ought  to  reverse  our  action  without  raising  the  question 
whether  we  were  right  or  wrong,  and  so  once  more  deserve 


Introduction  xxv 

our  reputation  for  generosity  and  for  the  redemption  of 
our  every  obligation  without  quibble  or  hesitation." 

President  Taft,  in  signing  the  PANAMA  CANAL 
Act,  which  was  approved  by  him  on  the  i24th  of  August, 
1J)1'2,  filed  a  memorandum  wherein  he  stated  that  in  a 
message  to  Congress  he  had  suggested  a  possible  amend- 
ment by  which  all  persons  and  especially  British  subjects 
who  felt  aggrieved  by  its  provisions  on  the  ground  that 
they  are  in  violation  of  the  Hay-Pauncefote  treaty,  might 
try  that  question  out  in  the  Supreme  Court  of  the  United 
States.  This  raises  a  constitutional  question  about  which 
there  is  much  misconception,  namely,  the  conflict  between 
a  treaty  and  a  later  act  of  Congress.  Article  II,  Section  1 
of  the  Constitution  provides  that  the  laws  of  the  United 
States  and  all  treaties  made  under  the  authority  of  the 
United  States  shall  be  the  supreme  law  of  the  land. 
There  have  been  many  decisions  of  the  Supreme  Court 
upon  the  subject  which,  if  read  apart  from  the  specific 
issues  involved,  are  apt  to  confuse.  This  subject  cannot 
be  adequately  considered  in  this  introduction,  and  there- 
fore I  shall  content  myself  with  quoting  from  Justice 
Miller's  decision  in  the  Supreme  Court,  in  the  Head 
Money  Cases,  112  U.  S.    He  says: 

"A  treaty  is  primarily  a  compact  between  independent 
nations.  It  depends  for  the  enforcement  of  its  provisions 
on  the  interest  and  the  honor  of  the  Governments  which 
are  parties  to  it.  If  these  fail,  its  infraction  becomes  the 
subject  of  international  negotiations  and  reclamations, 
so  far  as  the  injured  party  chooses  to  seek  redress,  which 
maj^  in  the  end  be  enforced  by  actual  war.  It  is  obvious 
that  irith  all  this  the  judicial  courts  have  nothing  to  do  and 
can  give  no 


XX  vi  Introduction 

The  authors  of  this  book,  by  learning  and  ability, 
are  eciuipped  to  present  "THE  PANAMA  CANAL  TOLLS 
Controversy"  with  an  impartial  spirit,  and  they  have 
rendered  a  useful  serviee  in  presenting  in  a  clear  and 
connected  form  this  important  chapter  in  our  legislative 
history,  together  with  its  bearing  upon  our  international 
obligations.  In  the  repeal  of  the  Tolls  Provision  of  the 
Panama  Act,  we  were  not  cringing  or  yielding  to  either 
Great  Britain  or  to  any  other  foreign  power;  we  were  actu- 
ated not  by  a  spirit  of  weakness,  as  some  of  the  opponents 
of  the  repeal  charged,  but  by  a  spirit  of  conscientious 
righteousness  and  of  conscious  strength.  We  yielded  to 
our  own  exalted  sense  of  public  honor  to  the  credit  of  this 
and  future  generations  of  America. 

The  example  we  have  set  will  not  be  forgotten.  That 
it  was  rightly  interpreted  by  the  chancelleries  of  the  world 
and  by  Great  Britain  is  shown  by  the  speech  made  by 
Sir  Edward  Grey,  her  Secretary  of  State  for  Foreign 
Affairs,  in  the  House  of  Commons.    He  said: 

"It  has  not  been  done  to  please  us,  or  in  the  interest 
of  good  relations,  but  I  believe  from  a  much  greater 
motive — the  feeling  that  a  Government  which  is  to  use 
its  influence  among  nations  to  make  relations  better 
must  never,  when  the  occasion  arises,  flinch  or  quail 
from  interpreting  treaty  rights  in  a  strictly  fair  spirit." 

This  statement  has  a  pecuhar,  if  not  prophetic  sig- 
nificance in  connection  with  the  expressed  reasons  pre- 
sented by  Sir  Edward  Grey  which  impelled  Great  Britain 
to  take  part  in  this  gigantic  and  deplorable  war  now 
devastating  the  European  worlds 

OSCAR  S.  STRAUS. 


INTRODUCTION 


UNITED  STATES  SENATE 
Washington,  D.  C. 

In  this  work,  the  authors  have  estabhshed  the  cor- 
rectness of  President  Wilson's  Panama  Canal  Tolls  policy. 
They  hold  that  the  Hay-Pauncefote  treaty  is  a  world 
pact,  and,  as  now  construed,  is  an  international  agreement 
without  a  flaw.  In  this  they  are  in  full  accord  with  the 
late  President  McKinley  and  his  great  Secretary  of  State, 
John  Hay,  by  whom  the  treaty  was  negotiated. 

In  the  dedication  they  show  their  appreciation  of 
President  Wilson  in  the  following: 

PRESIDENT  WOODROW  WILSON 

(Democrat) 

who  in  his  efforts  to  secure  the  repeal  of  the  tolls- 
exemption  clause  of  the  Panama  Canal  Act,  took  and 
successfully  maintained  as  exalted  moral,  courageous 
and  patriotic  a  position  as  was  ever  taken  and  main- 
tained by  any  Executive  of  any  nation. 

,  That  the  great  Secretary  of  State,  William  Jennings 
Bryan — confronted  in  this  great  international  upheaval 
and  calamity  with  graver  questions  and  greater  burdens 
in  actual  labor  than  have  confronted  any  Secretary  since 
the  Republic  was  founded   (in  which  tremendous  labor 


xxviii  Introduction 

I  happen  to  know  he  is  and  has  been  engaged  with  all 
his  soul,  body  and  mental  faculties,  which  were  long  ago 
dedicated  to  his  country  and  the  final  and  permanent 
peace  of  the  world,  a  cause  now  so  rudely  and  suddenly 
interrupted,  leaving  his  Government  apparently,  and  for 
the  time  being,  at  least,  its  only  hope  and  repository), 
should  pause  those  labors  to  write  an  introduction  to 
the  book  and  commend  its  purpose  and  style,  shows  its 
importance  now  and  for  the  future.  The  same  can  be 
said  of  the  introduction  (a  substantial  contribution  in 
itself  to  the  value  of  the  work)  by  Hon.  Oscar  S.  Straus, 
member  for  the  United  States  of  the  Permanent  Court 
of  Arbitration  at  the  Hague,  and,  with  the  single  excep- 
tion of  Colonel  Roosevelt,  the  most  prominent  member 
of  the  leading  minority  (Progressive)  party  in  the  last 
national  election;  who,  while  the  central  figure  at  Wash- 
ington, in  an  effort  to  bring  about  peace  in  Europe,  paused 
to  examine  the  manuscript  and  commend  the  work.  No 
further  comment  on  the  importance  or  excellence  of  the 
work  is  necessary. 

This  book  is  intelligently  conceived  and  well  executed. 
It  is  on  an  important  international  question  on  which  an 
enlightened  public  opinion  is  most  desirable.  It  states 
the  correct  view  on  this  question  in  a  clear,  logical  and 
convincing  argument.  I  commend  it  to  the  public  as  a 
creditable  contribution  to  the  discussion  of  the  question. 

The  chapter  which  treats  of  the  financial  aspects  of 
tolls-exemption  is  a  novel  contribution  to  the  subject. 
It  applies  the  principle  developed  in  the  regulation  of 
national,  state  and  municipal  utilities  to  the  management 
of  the  Panama  Canal — an  international  utility  whereof 


Introduction  xxix 

the  United  States  is  merely  trustee.  It  shows  that  the 
sentence  of  the  Hay-Pauncefote  treaty: 

"Such  conditions  and  changes  of  traflSc  shall  be  just 
and  equitable"  obligates  the  United  States  to  manage 
it  as  a  public  utility,  that  is,  for  the  benefit  of  mankind 
"on  equal  terms  to  all." 

This  chapter  alone  makes  the  work  one  of  merit 
and  commends  it  to  the  considerate  attention  of  the 
public. 

The  work  as  a  whole  makes  a  searching  analysis  of  the 
data  (historical  and  contemporary)bearing  on  the  mean- 
ing of  the  Hay-Pauncefote  treaty,  and  shows  the  meaning 
that  the  data  reveal  in  forceful  English.  It  makes  effec- 
tive use  of  the  conclusions  arrived  at  by  others.  Thus 
the  reader  will  get  a  comprehensive  survey  of  the  whole 
question  in  a  single  volume. 

The  authors  of  this  work  are  members  of  the  Pro- 
gressive Party.  Their  vigorous  defense  of  an  important 
policy  of  a  President  belonging  to  another  party  is  re- 
markable, and  shows  a  commendable  spirit.  They  aim 
at  the  elimination  of  tolls-exemption  from  domestic 
politics.  To  further  this  object,  they  have  quoted  exten- 
sively from  Republican  addresses  while  recognizing  the 
great  merit  of  contemporary  Democratic  addresses  in  the 
Senate  and  the  House.  The  Democratic  Party  is  given 
paramount  credit  for  the  repeal  of  the  tolls  exemption 
clause  of  the  Panama  Canal  Act. 

The  tolls-exemption  clause  of  the  Panama  Canal 
Act  is  repealed  due  to  the  zeal,  sustained  effort  of  exalted 
moral  purpose  of  the  President,  supported  by  the  great 
majority  of  the  members  of  his  own  party.     Re-enact- 


XXX  Introduction 

ment  of  such  a  statute  should  be  made  impossible.  This 
book  is  a  sane,  forceful  and  unanswerable  statement  of 
the  case  against  the  right  of  the  United  States  to  exempt 
any  of  its  shipping,  coastwise  and  foreign,  through  the 
canal,  as  was  proposed  in  the  foregoing  statute  which  was 
declared  to  be  repugnant  to  the  Hay-Pauncefote  treaty. 

This  work  should  contribute  much  to  the  formation 
of  a  sound  public  opinion  on  this  extremely  delicate  inter- 
national question  and  thereby  aid  in  eliminating  it  from 
domestic  politics.  Tolls-exemption  is  a  dangerous  ques- 
tion because  of  its  susceptibility  to  the  uses  of  the  political 
demagogue.  We  own  the  canal  and  are  sovereign  in  the 
Canal  Zone.  It  is,  therefore,  only  right  and  proper  that 
we  should  manage  it  as  we  please.  Why  knuckle  down 
to  England?  Such  half-truths  as  these  are  more  mis- 
leading than  deliberate  falsehoods,  and  make  this  question 
an  annoying  political  issue  because  wrong  may  easily 
gain  ascendancy.  Therefore,  all  good  citizens,  regardless 
of  party,  should  aid  in  forming  a  sound  public  opinion 
on  this  question.  This  is  an  admirable  handbook  for 
use  in  this  connection. 

Candidates  for  membership  in  the  House  of  Repre- 
sentatives and  the  United  States  Senate  who  are  opposed 
to  the  policy  of  tolls-exemption  will  find  this  work  a  great 
help  in  conclusively  answering,  opponents  who  favor  tolls- 
exemption.  They  can  effectively  point  to  its  authorship 
by  two  members  of  the  Progressive  Party  and  quote 
therefrom  unanswerable  arguments  taken  from  notable 
addresses  in  favor  of  the  repeal  of  the  tolls-exemption 
clause  of  the  Panama  Canal  Act  by  members  of  the 
Republican  Party. 


Introdvction  xxxi 

Of  the  joint  authors  of  this  work,  one  is  a  distinguished 
member  of  the  Bar  of  the  Supreme  Court  of  the  United 
States,  was  a  Federal  Attorney  under  the  McKinley 
administration  and  Special  Assistant  to  the  Attorney- 
General  of  the  United  States  in  charge  of  important 
cases  in  that  Court  and  elsewhere  under  the  adminis- 
trations of  both  Roosevelt  and  Taft;  was  an  important 
Commissioner  of  the  State  of  New  York  under  the  ad- 
ministrations of  Governors  Higgins  and  Hughes,  and 
held  an  important  commission  to  go  abroad  under  the 
Taft  administration.  He  is  a  member  of  the  State  Com- 
mittee of  the  Progressive  Party  in  New  York,  one  of  the 
organizers  and  principal  supporters  of  that  party,  and  its 
choice  in  the  fusion  movement  of  1913  for  Supreme 
Court  Justice.  The  other,  also  a  prominent  Progressive, 
and  a  former  Professor  of  Political  Economy  in  Cornell 
College,  is  now  statistician  with  the  Public  Service  Com- 
mission for  New  York  City  and  hence  as  well  qualified 
to  discuss  the  financial,  economic  as  well  as  the  public 
utility  phases  of  the  Canal  tolls  problem  as  any  other 
authority  in  the  United  States.  Both  authors,  therefore, 
are  peculiarly  qualified,  professionally  and  politically, 
to  prepare  the  history  of  this  vital  and  lately  menacing 
problem  without  bias  toward  the  President  or  the  party 
happening  to  be  in  power  at  the  time  of  the  repeal  of  the 
tolls-exemption  clause  of  the  Panama  Canal  Act  com- 
plained of  by  practically  all  of  the  maritime  nations  of 
the  world. 

Having  been  a  member  of  Congress  in  1912  when  the 
Canal  Act  was  passed  with  the  objectionable  clause,  and 
a  member  of  the  United  States  Senate  in  1914  when  the 


xxxii  Introduction 

same  was  repealed,  and  having  heard  the  notable  and 
exhaustive  debates  on  the  subject  on  both  occasions, 
I  am  justified  in  saying,  after  an  examination  of  the 
work,  that  the  essence  of  the  whole  matter  is  contained 
in  this  volume.  In  my  judgment  it  will  at  once  become 
the  authoritative  work  on  this  great  question,  not  only 
in  the  United  States,  but  in  all  nations  interested  in  the 
use  of  the  Panama  Canal. 

I  may  also  add  that  the  manuscript  of  this  book 
was  shown  to  President  Wilson,  who  examined  it 
hurriedly.  He  then  stated  that  it  appeared  to  him 
"to  have  been  most  intelligently  conceived  and  well 
executed,"  and  that  "it  would  stand  securely  on  its  own 
merits." 

Further  commendation  of  this  work — The  Panama 
Canal  Tolls  Controversy — is  unnecessary.  It  should  be 
as  widely  circulated  as  possible  by  those  who  believe 
that  the  United  States  should  manage  the  Panama 
Canal  in  accordance  with  the  world-view  design  embodied 
in  the  Hay-Pauncefote  treaty. 

WILLIAM  HUGHES, 

United  States  Senator  from  New  Jersey. 


Chapter  I 

The  Meaning  of  the  Hay-Pauncefote  Treaty 

Early  Spanish  explorers  ascended  every  river  of 
Central  America  for  the  purpose  of  finding  a  passage 
through  which  their  vessels  might  reach  those  lands  of 
boundless  wealth  of  which  Marco  Polo  had  given  a  vivid 
description.  They  were  bent  on  finding  the  shortest 
route  from  Cadiz  to  Cathay,  and  thus  sought  a  natural 
interoceanic  waterway. 

With  the  advent  of  settlements  arose  the  idea  of 
artificial  transit  across  the  Isthmus.  A  wagon  road  was 
built  from  Porto  Bello  to  Panama  in  the  sixteenth  century. 
More  ambitious  projects  flourished  and  decayed  during 
the  lapse  of  centuries.  They  furnish  a  history  of  failure 
and  blighted  hopes.  Spain,  Holland,  Belgium,  France 
and  England  were  at  one  time  or  another  interested  in 
the  construction  of  an  Isthmian  Canal. 

The  United  States  became  interested  in  1826.  Henry 
Clay,  Secretary  of  State,  wrote  to  our  representatives  to 
the  Panama  congress  held  that  year: 

"A  cut  or  a  canal  for  purposes  of  navigation  some- 
where through  the  Isthmus  that  connects  the  two  Americas 
to  unite  the  Pacific  and  Atlantic  Oceans  will  form  a  proper 
subject  of  consideration  at  the  congress.  That  vast  ob- 
ject, if  it  should  be  ever  accomplished,  will  be  interesting 
in  a  greater  or  less  degree  to  all  parts  of  the  world.    But 


2  The  Panama  Tolls  Controversy 

to  this  continent  will  probably  accrue  the  largest  amount 
of  benefit  from  its  execution,  and  to  Colombia,  Mexico, 
the  Central  Republic,  Peru  and  the  United  States  more 
than  to  any  other  of  the  American  nations.  What  is  to 
rebound  to  the  advantage  of  all  America  should  be  effected 
by  common  means  and  united  exertions  and  should  not 
be  left  to  the  separate  and  unassisted  efforts  of  any  one 
power.  *  *  *  jj  iJig  work  should  ever  be  executed  so  as 
to  admit  of  the  passage  of  sea  vessels  from  ocean  to  ocean,  the 
benefits  of  it  ought  not  to  be  exclusively  appropriated  to  any 
one  nation,  but  should  be  extended  to  all  parts  of  the  globe 
upon  the  payment  of  a  just  compensation  or  reasonable 
tolls.'" 

The  declaration  by  the  then  Secretary  of  State  that 
the  benefits  of  the  canal  should  be  extended  to  all 
parts  of  the  globe  and  should  not  be  exclusively  appro- 
priated by  any  nation  has  been  confirmed  by  American 
statesmen  of  all  parties — Whig,  Democratic  and  Repub- 
lican— with  substantial  unanimity.  The  principle  has 
been  enunciated  by  presidential  messages,  by  instructions 
from  Secretaries  of  State  and  by  resolutions  of  the  House 
and  Senate  of  Congress. 

Senator  Burton  is  credited  with  the  following : 
"The  romantic  triumphs  of  Decatur,  Bainbridge  and 
the  other  heroes  of  our  early  days  against  the  Barbary 
pirates  of  the  Mediterranean  were  particularly  notable 
because  they  secured  to  our  commerce  and  to  the  commerce 
of  other  nations  the  assurance  of  safety  in  those  waters 
without  the  payment  of  ransom  or  tribute.  *  *  *  Jf 
there  is  one  policy  to  which  as  a  nation  we  have  been 
committed  during  the  entire  time  of  our  existence,  it  is 


Meaning  of  Hay-Pauncefote  Treaty  3 

that  of  neutralization  of  waterways  and  the  use  of  all 
waterways,  natural  and  artificial,  by  all  nations  on  equal 
terms.  Our  country  was  one  of  the  most  active  in  protest- 
ing against  the  sound  dues  imposed  by  the  Danish  Govern- 
ment, although  ships  had  to  pass  from  the  North  Sea  to 
the  Baltic  Sea  within  cannon  shot  of  shore,  and  these 
channels  were  furnished  by  the  Danish  Government  with 
such  aids  to  navigation  as  lights  and  buoys.  We  insisted 
upon  the  continued  neutralization  of  the  Strait  of  Magel- 
lan. In  1879  Mr.  William  M.  Evarts,  then  Secretary  of 
State,  declared  that  the  United  States  would  not  tolerate 
exclusive  claims  by  any  nation  whatsoever  to  the  Strait 
of  Magellan  and  would  hold  any  nation  responsible  that 
might  undertake  by  any  pretext  to  lay  any  impost  or 
check  on  the  commerce  of  the  United  States  through  that 
strait." 

The  foregoing  shows  the  traditional  policy  of  the 
United  States  in  its  formative  period.  We  will  trace  its 
development. 

In  the  year  1835,  during  the  administration  of  Presi- 
dent Jackson,  the  Senate  of  the  United  States  unanimously 
adopted  a  resolution,  as  follows: 

^'Resolved,  That  the  President  of  the  United  States 
be  respectfully  requested  to  consider  the  expediency  of 
opening  negotiations  with  the  Governments  of  other  na- 
tions, and  particularly  with  the  Governments  of  Central 
America  and  New  Granada,  for  the  purpose  of  effectually 
protecting,  by  suitable  treaty  stipulations  with  them, 
such  individuals  or  companies  as  may  undertake  to  open  a 
communication  between  the  Atlantic  and  Pacific  Oceans 
by  the  construction  of  a  ship  canal  across  the  isthmus 


4  The  Panama  Tolls  Controversy 

which  connects  North  and  South  America,  and  of  securing 
forever  by  such  stipulations  the  free  arid  equal  right  of 
navigating  such  canal  to  all  such  nations  on  the  payment 
of  such  reasonable  tolls  as  may  be  established  to  compen- 
sate the  capitalists  who  may  engage  in  such  undertaking 
and  complete  the  work." 

During  the  administration  of  President  Van  Buren, 
in  a  report  to  the  House  of  Representatives  March  2,  1839, 
Mr.  Mercer,  of  Virginia,  from  the  Committee  on  Roads 
and  Canals,  stated: 

"The  policy  is  not  less  apparent  which  would  prompt 
the  United  States  to  co-operate  in  this  enterprise,  liberally 
and  efficiently,  before  other  disposition  may  be  awakened 
in  the  particular  State  within  whose  territory  it  may  be 
ceded  or  other  nations  shall  seek  by  negotiations  to  engross 
a  commerce  ivhich  is  now  and  sJiould  ever  continue  open  to 
all." 

In  the  same  year  the  House  of  Representatives  by 
unanimous  vote  adopted  a  resolution  much  the  same  as 
that  of  the  Senate  in  1835,  requesting  the  President — 
"to  consider  the  expediency  of  opening  or  continuing 
negotiations  with  the  Governments  of  other  nations,  and 
particularly  with  those  the  territorial  jurisdiction  of  which 
comprehends  the  Isthmus  of  Panama,  and  to  which  the 
United  States  have  accredited  ministers  or  agents,  for  the 
purpose  of  ascertaining  the  practicability  of  effecting  a 
communication  between  the  Atlantic  and  Pacific  Oceans 
by  the  construction  of  a  ship  canal  across  the  Isthmus 
and  of  securing  forever  by  suitable  treaty  stipulations  the 
free  and  equal  right  of  navigating  such  canal  by  all  nations." 

In  a  letter  to  Mr.  Buchanan,  Secretary  of  State, 


Meaning  of  Hay-Pauncefote  Treaty  5 

on  December  17,  1845,  the  commissioner  accredited  to 
examine  a  canal  route  said: 

"Like  all  other  international  questions,  it  can  only  be 
satisfactorily  adjusted  by  concert  with  the  other  maritime 
powers  which  have  similar  interests,  more  or  less  import- 
ant, and  whose  assent  is  necessary  to  place  the  proposed 
passage  under  the  protection  and  guaranty  of  the  public 
law,  recognized  by  the  whole  world." 

In  the  treaty  of  1846  with  New  Granada  occurs  the 
following: 

"Any  modes  of  communication  that  now  exist, 
or  that  may  be  hereafter  constructed,  shall  be  open  and 
free  to  the  Government  and  citizens  of  the  United 
States,  and  for  the  transportation  of  any  articles  of  pro- 
duce, manufactures  or  merchandise  of  lawful  commerce 
belonging  to  the  citizens  of  the  United  States;  that  no 
other  tolls  or  charges  shall  be  levied  or  collected  upon 
the  citizens  of  the  United  States,  or  their  said  merchandise 
thus  passing  over  any  road  or  canal  that  may  be  made  by 
the  Government  of  New  Granada,  or  by  the  authority  of 
the  same,  than  is,  under  like  circumstances,  levied  upon 
and  collected  from  the  Granadian  citizens." 

On  the  conclusion  of  the  treaty  with  New  Granada 
in  1846  President  Polk  submitted  it  to  the  Senate  with  a 
message,  in  which  he  said: 

"In  entering  into  the  mutual  guaranties  proposed  by 
the  thirty-fifth  article,  neither  the  Government  of  New 
Granada  nor  that  of  the  United  States  has  a  narrow  or 
exclusive  view.  The  ultimate  object,  as  presented  by  the 
Senate  of  the  United  States  in  their  resolution  (March 
3,  1835),  to  which  I  have  already  referred,  ?'.s'  to  secure 


6  The  Panama   Tolls  Controversy 

to  all  nations  the  free  and  equal  right  of  passage  over  the 
Isthmus." 

,THE  CLAYTON-BULWER  TREATY 

This  treaty  was  adopted  July  5,  1850.  The  territorial 
background  as  it  then  existed  and  the  clearly  defined 
neutralization  policy  developed  in  prior  administrations 
are  the  causes  of  which  the  contents  of  this  treaty  are  the 
resultant.  In  the  foregoing,  w^e  outlined  the  then  American 
isthmian  canal  policy.  The  territorial  background  is 
clearly  stated  in  the  following  by  Senator  Root: 

"In  the  year  1850,  there  were  two  great  powers  in 
possession  of  the  North  American  continent  to  the  north 
of  the  Rio  Grande.  The  United  States  had  but  just  come 
to  its  full  stature.  By  the  Webster-Ashburton  treaty  of 
1842  our  northeastern  boundary  had  been  settled,  leaving 
to  Great  Britain  that  tremendous  stretch  of  seacoast 
including  Nova  Scotia,  New  Brunswick,  Newfoundland, 
Labrador  and  the  shores  of  the  Gulf  of  St.  Lawrence,  now 
forming  the  Province  of  Quebec.  In  1846  the  Oregon 
boundary  had  been  settled,  assuring  to  the  United  States 
a  title  to  that  vast  region  which  now  constitutes  the  States 
of  Washington,  Oregon  and  Idaho.  In  1848  the  treaty  of 
Guadalupe-Hidalgo  had  given  to  us  that  great  empire 
wrested  from  Mexico  as  a  result  of  the  Mexican  War, 
which  now  spreads  along  the  coast  of  the  Pacific  as  the 
State  of  California  and  the  great  region  between  California 
and  Texas. 

"Inspired  by  the  manifest  requu-ements  of  this  new 
empire,  the  United  States  turned  its  attention  to  the  pos- 
sibility of  realizing  the  dream  of  centuries  and  connecting 


Meaning  of    Hay-Paimcefote   Treaty  7 

its  two  coasts — its  old  coast  upon  the  Atlantic  and  its 
new  coast  upon  the  Pacific — by  a  ship  canal  through  the 
Isthmus;  but  when  it  turned  its  attention  in  that  direction 
it  found  the  other  empire  holding  the  place  of  advantage. 
Great  Britain  had  also  her  coast  upon  the  Atlantic  and  her 
coast  upon  the  Pacific,  to  be  joined  by  a  canal.  Further 
than  that,  Great  Britain  Avas  a  Caribbean  power.  She  had 
Bermuda  and  the  Bahamas;  she  had  Jamaica  and  Trini- 
dad; she  had  the  Windward  Islands  and  the  Leeward 
Islands;  she  had  British  Guiana  and  British  Honduras; 
she  had,  moreover,  a  protectorate  over  the  Mosquito 
Coast,  a  great  stretch  of  territory  upon  the  eastern  shore 
of  Central  America  which  included  the  river  San  Juan  and 
the  valley  and  harbor  of  San  Juan  de  Nicaragua,  or  Grey- 
town.  All  men's  minds  then  were  concentrated  upon  the 
Nicaragua  Canal  route,  as  they  were  until  after  the  treaty 
of  1901  was  made. 

'"And  thus  when  the  United  States  turned  its  atten- 
tion toward  joining  these  two  coasts  by  a  canal  through 
the  Isthmus  it  found  Great  Britain  in  possession  of  the 
eastern  end  of  the  route  which  men  generally  believed 
would  be  the  most  available  route  for  the  canal.  Accord- 
ingly, the  United  States  sought  a  treaty  with  Great  Britain 
by  which  Great  Britain  should  renounce  the  advantage 
which  she  had  and  admit  the  United  States  to  equal  par- 
ticipation with  her  in  the  control  and  the  protection  of  a 
canal  across  the  Isthmus.  From  that  came  the  Clayton- 
Bulwer  treaty. 

"Let  me  repeat  that  this  treaty  was  sought  not  by 
England  but  by  the  United  States.  Mr.  Clayton,  who  was 
Secretary  of  State  at  the  time,  sent  our  minister  to  France, 


8  The  Panama  Tolls  Controversy 

Mr,  Rives,  to  London  for  the  purpose  of  urging  upon  Lord 
Palmerston  the  making  of  the  treaty.  The  treaty  was 
made  by  Great  Britain  as  a  concession  to  the  urgent 
demands  of  the  United  States." 


"In  the  administration  of  President  Taylor,  our  Secre- 
tary of  State,  Mr.  Clayton,  opened  negotiations  with  Great 
Britain  with  a  view  to  adjusting  the  differences  between 
the  two  countries,  Mr.  Rives,  our  minister  to  France,  being 
appointed  to  submit  the  views  of  the  United  States  to 
Lord  Palmerston.  Mr.  Rives,  in  his  letter  to  Secretary 
Clayton  of  September  25,  1849,  describes  his  interview 
with  Lord  Palmerston  and  states  that  in  pursuance  of 
his  instructions  he  had  said  to  him: 

That  the  United  States,  moreover,  as  one  of  the  principal 
commercial  powers  of  the  world,  and  the  one  nearest  to  the 
scene  of  the  proposed  communication,  and  holding,  besides,  a 
large  domain  on  the  western  coast  of  America,  had  a  special, 
deep  and  national  interest  in  the  free  and  unobstructed  use,  in 
common  with  other  powers,  of  any  channel  of  intercourse  which 
might  be  opened  from  the  one  sea  to  the  other;  *  *  *  iji^i 
the  United  States  sought  no  exclusive  privilege  or  ■preferential  right 
of  any  kind  in  regard  to  the  proposed  communication,  and  their 
sincere  wish,  if  it  should  he  found  practicable,  was  to  see  it  dedicated 
to  the  common  use  of  all  nations  on  the  most  liberal  terms  and  a 
fooling  of  perfect  equality  for  all;  *  *  *  that  the  United  Stales 
would  not,  if  they  could,  obtain  any  exclusive  right  or  privilege  in  a 
great  highway  which  naturally  belonged  to  all  mankind. 


"That  was  the  spirit  of  the  Clayton-Bulwer  conven- 
tion. That  was  what  the  United  States  asked  Great 
Britain  to  agree  upon.  That  self-denying  declaration 
underlaid  and  permeated  and  found  expression  in  the 


Meaning  of   Ilay-Paunccfote  Treaty  9 

terms  of  the  Clayton-Bulwer  convention.  And  upon  that 
representation  Great  Britain  in  that  convention  relin- 
quished her  coign  of  vantage  which  she  herself  had  for 
the  benefit  of  her  great  North  American  empire  for  the 
control  of  the  canal  across  the  Isthmus." 

That  the  foregoing  representation  is  correct  is  con- 
firmed by  Henderson  in  the  following  taken  from  his  work 
on  American  Diplomatic  Questions: 

"In  the  correspondence  that  took  place  between  Mr. 
Clayton  and  Messrs.  Bancroft  and  Lawrence,  successive 
American  ministers  in  London,  and  also  in  the  records  of 
interviews  between  Mr.  Clayton  and  Mr.  Crampton,  the 
British  minister  in  Washington,  preparatory  to  the  actual 
negotiations  for  a  treaty,  the  attitude  of  Mr.  Clayton  and 
of  the  Taylor  administration  toward  the  question  of  a 
Central  American  Canal  is  fully  and  most  clearly  set  forth. 
The  Secretary  of  State  was  thoroughly  in  accord  with  the 
popular  view  that  under  no  circumstances  should  the 
United  States  permit  Great  Britain  or  any  other  power  to 
exercise  exclusive  control  of  any  isthmian  transit  route. 
Upon  the  other  hand,  he  did  not  seek  for  his  own  country 
the  exclusive  control  he  denied  to  others,  and  in  assuming 
his  position  he  followed  the  universally  accepted  theory 
of  the  complete  neutrality  of  ship  canals.  The  doctrine 
of  international  freedom  of  transit  as  applying  to  artificial 
waterways  had  been  defended  by  Clay  in  1826,  and 
supported  by  unanimous  resolutions  of  Congress  in  1835 
and  again  in  1839.  President  Polk  had  not  found  this 
doctrine  inconsistent  with  his  notions  of  an  aggressive 
Monroe  Doctrine,  and  his  successor,  in  his  annual  message 
to  Congress  of  1849,  had  declared  that  no  power  should 


10  The  Panama  Tolls  Controversy 

occupy  a  position  that  would  enable  it  hereafter  to  exercise 
so  controlling  an  influence  over  the  commerce  of  the  world, 
or  to  obstruct  a  highway  which  ought  to  be  dedicated  to 
the  common  use  of  mankind.  The  convention  concluded 
with  Colombia  three  years  previously  contained  a  special 
clause  calling  for  a  guarantee  of  neutrality  of  the  pro- 
posed isthmian  transit  route.  No  other  ideas  of  the 
political  status  of  an  interoceanic  ship  canal  had  ever 
been  entertained.     *     *     * 

"When  it  was  understood  by  both  Mr.  Clayton  and 
Lord  Palmerston,  as  revealed  by  their  correspondence, 
that  neither  power  actually  sought  monopoly  power  over 
the  canal,  the  way  was  cleared  of  the  most  formidable 
obstacle  to  the  conclusion  of  a  treaty.     *     *     * 

"Having  in  mind  a  policy  thus  broad  and  liberal,  Mr. 
Clayton  entered  upon  the  negotiations  of  a  treaty  with 
Great  Britain,  desirous  of  obtaining  no  exclusive  privileges 
in  Central  America  that  should  be  incompatible  with  the 
just  rights  of  other  nations;  he  was  intent  only  on  prepar- 
ing the  way  for  the  construction  of  a  great  international 
highway  that  should  be  open  to  the  world's  commerce 
upon  terms  equal  to  all." 

As  the  ''general  principle"  of  neutralization  estab- 
lished in  Article  VIII  of  the  Clayton-Bulwer  treaty  has 
not  been  superseded,  but  is  continued  ''unimpaired"  in 
the  preamble  and  in  Article  IV  of  the  Hay-Pauncefote 
treaty,  we  will  quote  that  article  in  full. 

"The  Governments  of  the  United  States  and  Great 
Britain  having  not  only  desired,  in  entering  into  this 
convention,  to  accomplish  a  particular  object,  but  also  to 


Meaning  of    Hmj-Pauncefotc   Treaty  11 

establish  a  general  principle,  they  hereby  agree  to  extend 
their  protection,  by  treaty  stipulations,  to  any  other 
practicable  communications,  whether  by  canal  or  railway, 
across  the  isthmus  which  connects  North  and  South  Amer- 
ica, and  especially  to  the  interoceanic  communications, 
should  the  same  prove  to  be  practicable,  whether  by  canal 
or  railway,  which  are  now  proposed  to  be  established  by 
the  way  of  Tehuantepec  or  Panama.  In  granting,  however, 
their  joint  protection  to  any  such  canals  or  railways  as 
are  by  this  article  specified,  it  is  always  understood  by 
the  United  States  and  Great  Britain  that  the  parties 
constructing  or  owning  the  same  shall  impose  no  other 
charges  or  conditions  of  traffic  thereupon  than  the  afore- 
said Governments  shall  approve  of  as  just  and  equitable; 
and  that  the  same  canals  or  railways,  being  open  to  the 
citizens  and  subjects  of  the  United  States  and  Great 
Britain  on  equal  terms,  shall  also  be  open  on  like  terms  to 
the  citizens  and  subjects  of  every  other  State  which  is 
willing  to  grant  thereto  such  protection  as  the  United 
States  and  Great  Britain  engage  to  afford." 

"  There  is  the  explicit  agreement  for  equality  of  treatment 
to  the  citizens  of  the  United  States  and  to  the  citizens  of  Great 
Britain  in  any  canal,  wherever  it  may  be  constructed,  across 
the  Isthmus.  That  was  the  fundamental  principle  embodied 
in  the  treaty  of  1850,  and  that  was  the  'general  principle' 
that  the  treaty  of  1901  left  unimpaired.'^ 

Senator  Root  continued : 

"After  the  lapse  of  some  thirty  years,  during  the  early 
part  of  which  we  were  strenuously  insisting  upon  the  ob- 
servance by  Great  Britain  of  her  obligations  under  the 
Clayton-Bulwer  treaty  and  during  the  latter  part  of  which 


12  The  Panama   Tolls  Controversy 

we  were  beginning  to  be  restive  under  our  obligations  by 
reason  of  that  treaty,  we  undertook  to  secure  a  modifica- 
tion of  it  from  Great  Britain.  In  the  course  of  that  under- 
taking there  was  much  discussion  and  some  difference  of 
opinion  as  to  the  continued  obligations  of  the  treaty.  But 
I  think  that  was  finally  put  at  rest  by  the  decision  of  Secre- 
tary Oluey  in  the  memorandum  upon  the  subject  made  by 
him  in  the  year  1896.    In  that  memorandum  he  said:" 

Under  these  circumstances,  upon  every  principle  which 
governs  the  relation  to  each  other,  either  of  nations  or  of  in- 
dividuals, the  United  States  is  completely  estopped  from  denying 
that  the  treaty  is  in  full  force  and  vigor. 

If  changed  conditions  now  make  stipulations,  which  were 
once  deemed  advantageous,  either  inapplicable  or  injurious,  the 
true  remedy  is  not  in  ingenious  attempts  to  deny  the  existence 
of  the  treaty  or  to  explain  away  its  provisions,  but  in  a  direct 
and  straightforward  application  to  Great  Britain  for  a  re- 
consideration of  the  whole  matter. 

The  views  of  our  representative  men  in  the  interim 
of  1850,  when  the  Clayton-Bulwer  treaty  was  adopted, 
and  1901,  when  the  Hay-Pauncefote  treaty  was  concluded, 
are  of  interest  as  they  throw  light  on  what  the  authors 
intended  to  incorporate  in  the  latter  treaty.  The  more 
important  of  these  views  are  the  following: 

Secretary  of  State  Cass  said  to  Great  Britain  in  1857: 

''The  United  States,  as  I  hare  before  had  occasion  to 
assure  your  Lordship,  demand  no  exclusive  privileges  in 
these  passages,  but  will  always  exert  their  influence  to  secure 
their  free  and  unrestricted  benefits,  both  in  peace  and  war,  to 
the  commerce  of  the  world." 

Secretary  of  State  Seward  in  note  to  Minister  Adams, 
1862,  said: 


Meaning  of    Ilay-Pauncejote  Treaty  !.'> 

"This  Government  has  no  interest  in  the  matter 
diflFerent  from  that  of  other  maritime  powers.  It  is  wilHng 
to  interpose  its  aid  in  execution  of  its  treaty  and  further 
equal  benefit  of  all  nations." 

In  a  note  to  the  Colombian  minister,  January  18, 
1869,  Secretary  Seward  expressed  himself  in  the  same 
manner. 

Secretary  of  State  Fish : 

"A  Darien  Canal  should  not  be  regarded  as  hostile 
to  a  Suez  Canal;  they  will  be  not  so  much  rivals  as 
joint  contributors  to  the  increase  of  the  commerce  of 
the  world,  and  thus  mutually  advance  each  other's 
interests.     *     *     * 

"We  shall  *  *  *  be  glad  of  any  movement  which 
shall  result  in  the  early  decision  of  the  question  of  the  most 
practicable  route  and  the  early  commencement  and  speedy 
completion  of  an  interoceanic  communication,  which  shall 
be  guaranteed  in  its  perpetual  neutralization  and  dedica- 
tion to  the  commerce  of  all  nations,  without  advantages 
to  one  over  another  of  those  who  guarantee  its  assured 
neutrality.     *     *     * 

"*  *  *  the  benefit  of  neutral  waters  at  the  ends 
thereof  for  all  classes  of  vessels  entitled  to  fly  their  respec- 
tive flags,  with  the  cargoes  on  board,  on  equal  terms  in 
every  respect  as  between  each  other." 

Mr.  Blaine  said  in  his  instructions  to  Mr.  Lowell  on 
June  24,  1881,  directing  Mr.  Lowell  to  propose  to  Great, 
Britain  the  modification  of  the  Clayton-Bulwer  treaty: 

"The  United  States  recognizes  a  proper  guarantee 
of  neutrality  as  essential  to  the  construction  and  successful 
operation  of  any  highway  across  the  Isthmus  of  Panama, 


14  The  Panama   Tolls  Controversy 

and  in  the  last  generation  every  step  was  taken  by  this 
Government  that  is  deemed  requisite  in  the  premises. 
The  necessity  was  foreseen  and  abundantly  provided  for 
long  in  advance  of  any  possible  call  for  the  actual  exercise 
of  power.  *  *  *  Nor,  in  time  of  -peace,  does  the  United 
States  seek  to  have  any  exclusive  privileges  accorded  to  Ameri- 
can ships  in  respect  to  precedence  or  tolls  through  an  inter- 
oceanic  canal  any  more  than  it  has  sought  like  privileges  for 
American  goods  in  transit  over  the  Panama  Railway,  under 
the  exclusive  control  of  an  American  corporation.  The  extent 
of  the  privileges  of  American  citizens  and  ships  is  measurable 
under  the  treaty  of  1846  by  those  of  Colombian  citizens  and 
ships.  It  would  be  our  earnest  desire  and  expectation  to  see 
the  world's  peaceful  commerce  enjoy  the  same  just,  liberal  and 
rational  treatment.'''' 

In  another  place,  Secretary  of  State  Blaine  said  in 
his  instructions  to  Mr.  Lowell: 

'^  Nor  does  the  United  States  seek  any  exclusive  or 
narrow  commercial  advantage.  It  frankly  agrees,  and  will 
by  public  proclamation  declare  at  the  proper  time,  in  con- 
junction with  the  Republic  on  whose  soil  the  canal  may  be 
located,  that  the  same  rights  and  privileges,  the  same  tolls  and 
obligations  for  the  use  of  the  canal,  shall  apply  with  absolute 
impartiality  to  the  merchant  marine  of  every  nation  on  the 
globe;  and  equally  in  time  of  peace  the  harmless  use  of  ike 
canal  shall  be  freely  granted  to  the  war  vessels  of  other 
nations." 

Lord  Granville's  reply  thereto  was: 

"*  *  *  such  communication  concerned  not  merely 
the  United  States  or  the  American  continent,  but,  as  was 
recognized  by  Article  VIII  of  the  Clayton-Bulwer  treaty. 


Meaning  of    ?Iai/-Pauncefote   Treaty  lo 

the  whole  civilized  world,  and  that  England  would  not 
oppose  or  decline  any  discussion  for  the  purpose  of  secur- 
ing on  a  general  international  basis  its  universal  and 
unrestricted  use." 

President  Cleveland,  in  his  annual  message  of  1885, 
said: 

"The  lapse  of  years  has  abundantly  confirmed  the 
wisdom  and  foresight  of  those  earlier  administrations 
which,  long  before  the  conditions  of  maritime  intercourse 
were  changed  and  enlarged  by  the  progress  of  the  age, 
proclaimed  the  vital  need  of  interoceanic  transit  across  the 
American  Isthmus  and  consecrated  it  in  advance  to  the  com- 
mon use  of  mankind  by  their  positive  declarations  and 
through  the  formal  obligations  of  treaties.  Toward  such 
realization  the  efforts  of  my  administration  will  be  applied, 
ever  bearing  in  mind  the  principles  on  which  it  must  rest 
and  which  were  declared  in  no  uncertain  tones  by  Mr.  Cass, 
who,  while  Secretary  of  State  in  1858,  announced  that 
'What  the  United  States  want  in  Central  America  next  to 
the  happiness  of  its  people  is  the  security  and  neutrality 
of  the  interoceanic  routes  which  lead  through  it.' 

"*  *  *  Whatever  highway  may  be  constructed 
across  the  barrier  dividing  the  two  greatest  maritime  areas 
of  the  world  must  be  for  the  world's  benefit — a  trust  for 
mankind,  to  be  removed  from  the  chance  of  domination 
by  any  single  power,  nor  become  a  point  of  invitation  for 
hostilities  or  a  prize  for  warlike  ambition.     *     *     * 

"*  *  *  These  suggestions  may  serve  to  emphasize 
what  I  have  already  said  on  the  score  of  the  necessity  of  a 
neutralization  of  any  interoceanic  transit;  and  this  can 
only  be  accomplished  by  making  the  uses  of  the  route  open 


16  The  Panama  Tolls  Controversy 

to  all  nations  and  subject  to  the  ambitions  and  warlike 
necessities  of  none." 

In  the  foregoing  public  declarations,  by  the  solemn 
asservations  of  our  treaties  with  Colombia  in  1846,  with 
Great  Britain  in  1850,  we  presented  to  the  world  the  most 
unequivocal  guaranty  of  disinterested  action  for  the  common 
benefit  of  mankind  and  not  for  our  selfish  advantage. 

The  Hay-Pauncefote  treaty  must  be  construed  in  the 
light  of  that  historic  background  and  the  statements  of 
those  who  are  in  a  position  to  vouch  for  the  understanding 
reached  by  the  two  State  Departments  which  drafted  the 
treaty.  So  construed,  our  so-called  American  coastwise 
trade,  from  the  Atlantic  and  Gulf  of  Mexico  ports  to 
Pacific  ports,  and  vice  versa,  must  pay  the  same  rate  of  toll 
for  identical  units  of  traffic  as  other  commerce  using  the 
canal. 

THE  HAY-PAUNCEFOTE  TREATY 

The  intent  of  the  framers  of  the  treaty  is  naturally  of 
first  importance.  Neither  Mr.  Hay  nor  Lord  Pauncefote 
are  now  living,  but  evidences  remain.  Joseph  H.  Choate 
was  then  American  Ambassador  to  the  Court  of  St.  James 
and  had  to  do  with  the  negotiations. 

CHOATE  TO  SENATOR  McCUMBER 

"Dear  Senator  McC umber:  I  have  your  letter  of 
March  25,  in  which  you  ask  me  to  answer  two  questions 
in  regard  to  the  negotiation  of  the  Hay-Pauncefote  treaty 
of  1901. 

"First.  Was  it  understood  by  the  State  Departments 
of  the  two  countries  that  the  words  'vessels  of  commerce 
and  war  of  all  nations'  included  our  own  vessels? 


Meaning  of   Hay-Pauncefote  Treaty  17 

"Second.  Was  it  understood  that  these  words  also 
included  our  own  vessels  engaged  in  the  coastwise  trade? 

"I  answer  both  of  these  questions  most  emphatically 
in  the  affirmative.  The  phrase  quoted.  Vessels  of  com- 
merce and  war  of  all  nations,'  certainly  included  our 
own  vessels,  and  was  so  understood  by  our  own  State 
Department  and  by  the  foreign  office  of  Great  Britain. 
It  was  understood  by  the  same  parties  that  these  words 
also  included  our  own  vessels  engaged  in  the  coastwise 
trade.     *     *     * 

"When  we  came  to  the  negotiation  of  this  last  treaty, 
that  of  1901,  there  was  no  question  that,  as  between  the 
United  States  and  Great  Britain,  the  canal  should  be  open 
to  the  citizens  and  subjects  of  both  on  equal  terms,  and  that 
it  should  also  be  open  on  like  terms  to  the  citizens  and 
subjects  of  every  other  State  that  brought  itself  within 
the  category  prescribed.  On  that  point  there  was  really 
nothing  to  discuss,  and  in  the  whole  course  of  the  negotia- 
tions there  was  never  a  suggestion  on  either  side  that  the 
words  'the  vessels  of  commerce  and  of  war  of  all  nations' 
meant  anything  different  from  the  natural  and  obvious 
meaning  of  these  words.  Such  language  admitted  of  the 
exemption  or  exception  of  no  particular  kind  of  vessels  of 
commerce  and  of  war  of  any  nation,  whether  of  vessels 
engaged  in  foreign  trade  or  coastwise  trade,  or  of  steam 
vessels  or  sailing  vessels,  or  of  black  vessels  or  white  ves- 
sels, or  of  iron  vessels  or  wooden  vessels.  The  parties  to 
the  negotiation  tried  to  use  terms  of  the  meaning  of  which 
there  could  be  no  doubt  or  dispute,  and  they  meant  what 
they  said  and  said  what  they  meant, 

"It  is  true  that  in  many  treaties  there  have  been 


18  The  Panama   Tolls  Controversy 

specific  exceptions  of  vessels  engaged  in  the  coastwise 
trade,  and  it  would  have  been  easy  to  insert  it  here.  But 
nobody  ever  suggested  that  there  should  or  could  be 
such  an  exception  or  exemption  inserted  by  implication 
in  this  treaty. 

*  *         * 

"Of  course,  I  submitted  from  time  to  time  as  the  nego- 
tiations proceeded  the  substance  of  all  our  negotiations 
to  our  Secretary  of  State  in  dispatches  and  private  letters, 
all  of  which,  or  copies  of  which,  are,  as  I  believe,  on  file 
in  the  State  Department  and  are  doubtless  open  to  the 
examination  of  Senators.  And  Lord  Pauncefote  in  like 
manner  was  in  frequent  communication  with  Lord  Lans- 
downe  or  the  foreign  office  of  Great  Britain,  and,  of  course, 
submitted  all  that  was  said  and  done  between  us  to  them. 
So  when  what  you  refer  to  in  your  letter  as  the  State  De- 
partments of  the  two  countries  approved  and  adopted  the 
result  of  our  work  and  exchanged  ratifications  of  the  treaty 
as  it  stands,  they  necessarily  intended  that  the  words  'the 
vessels  of  commerce  and  of  war  of  all  nations'  included  our 
own  vessels  as  well  as  those  of  Great  Britain,  and  also 
included  our  own  vessels  engaged  in  the  coastwise  trade. 

"There  was  no  kind  of  vessel  that  the  words  used  did 
not  include.  I  am  not  at  liberty  to  furnish  you  with  copies 
of  my  reports  made  from  time  to  time  to  Colonel  Hay  of 
the  negotiations,  but  I  have  carefully  examined  them  to 
see  whether  any  suggestion  was  made  on  either  side  of 
the  possibility  of  the  exemption  or  exception  of  our  vessels 
engaged  in  the  coastwise  trade  and  find  absolutely  none." 

*  *         * 

"It  is  impossible,  in  my  judgment,  to  discuss  the 


Meaning  of   Hay-Pauncefote  Treaty  19 

question  fairly  on  the  true  interpretation  of  the  treaty 
and  come  to  any  other  conclusion  than  that  the  repeal  of 
the  exemption  clause  in  the  act  is  necessary  out  of  due 
regard  for  our  national  honor  and  good  faith." 
Elsewhere  the  former  ambassador  stated : 
"As  the  lips  of  both  these  diplomatists  and  great 
patriots,  who  were  true  to  their  own  countries  and  each 
regardful  of  the  rights  of  the  other,  are  sealed  in  death,  I 
think  that  it  is  proper  that  I  should  say  what  I  think  both 
of  them,  if  they  were  here  today,  would  say — that  the 
clause  in  the  Panama  Toll  act,  exempting  coastwise 
American  shipping  from  the  payment  of  tolls,  is  in  direct 
violation  of  the  treaty. 

"I  venture  to  say  that  in  the  whole  course  of  the 
negotiations  of  this  particular  treaty,  no  claim,  no  sug- 
gestion, was  made  that  there  should  be  any  exemption  of 
anybody." 

CHOATE  TO  SENATOR  O'GORMAN 

"I  avail  myseK  of  your  kind  permission  to  submit 
anything  of  mine  not  already  published  that  might  throw 
light  on  the  pending  question. 

"I  accordingly,  with  the  express  permission  of  the 
Secretary  of  State,  submit  to  your  committee  the  inclosed 
copies  of  letters  written  by  me  to  Secretary  Hay  between 
August  3  and  October  12,  1901,  giving  step  by  step 
the  negotiations  between  Lord  Lansdowne  and  Lord 
Pauncefote  and  myself  in  regard  to  the  Hay-Pauncefote 
treaty. 

"These,  if  carefully  perused,  will,  I  think,  be  found 
to  confirm  my  views  that  the  clause  in  the  Panama  Canal 


20  The  Panama   Tolls  Controversy 

act  exempting  our  coastwise  shipping  from  tolls  is  a  clear 
violation  of  the  treaty." 

CHOATE  TO  HENRY  WHITE 

"I  wrote  to  the  chairman  of  the  committee,  Senator 
O'Gorman,  inclosing  to  him,  by  the  express  permission 
of  the  Secretary  of  State,  a  copy  of  my  letters  to  Secretary 
Hay  between  August  3  and  October  12,  1901,  the  same 
that  you  have.  To  my  mind  they  establish  beyond  ques- 
tion the  intent  of  the  parties  engaged  in  the  negotiation, 
that  the  treaty  should  mean  exactly  what  it  says,  and 
excludes  the  possibility  of  any  exemption  of  any  kind  of 
vessels  of  the  United  States.  Equality  between  Great 
Britain  and  the  United  States  is  the  constant  theme,  and 
especially  in  my  last  letter  of  October  2,  1901,  where  I 
speak  of  Lord  Lansdowne's  part  in  the  matter,  and  say, 
'He  has  shown  an  earnest  desire  to  bring  to  an  amicable 
settlement,  honorable  alike  to  both  parties,  this  long  and 
important  controversy  between  the  two  nations.  In  sub- 
stance, he  abrogates  the  Ciayton-Bulwer  treaty,  gives  us 
an  American  canal,  ours  to  build  as  and  where  we  like,  to 
own,  control  and  govern,  on  the  sole  condition  of  Its  being 
always  neutral  and  free  for  the  passage  of  the  ships  of  all 
nations  on  equal  terms,  except  that  if  we  get  into  a  war 
with  any  nation  we  can  shut  its  ships  out  and  take  care  of 
ourselves.'  This  was  the  summing  up  of  our  whole  two 
months'  negotiation." 

Equality  between  Great  Britain  and  the  United  States 
in  the  use  of  the  canal  is  the  constant  theme.  It  was  to  be 
effected  by  a  new  treaty  "without  impairing  the  'general 
principle'  of  neutralization"  established  in  Article  VIII 
of  the  Claytdn-Bulwer  treaty. 


Meaning  of    Hay-Pauncefote  Treaty  21 

CHOATE  DEFINES  "GENERAL  PRINCIPLE" 

"As  Article  VIII  stands  in  the  Clayton-Bulwer  treaty 
it  undoubtedly  contemplates  further  treaty  stipulations, 
not  'these'  treaty  stipulations,  in  case  any  other  inter- 
oceanic  route  either  by  land  or  by  water  should  'prove 
to  be  practicable,'  and  it  proceeds  to  state  what  the 
general  principle  to  be  applied  is  to  be,  viz.,  no  other  charges 
or  conditions  of  traffic  therein  'than  are  just  and  equi- 
table,' and  that  said  canals  or  railways,  being  open  to  the 
subjects  of  Great  Britain  and  the  United  States  on  equal 
terms,  shall  also  be  open  on  like  terms  to  the  subjects  and 
citizens  of  other  States,  which  I  believe  to  be  the  real 
general  principle  (of  neutralization,  if  you  choose  to  call 
it  so)  intended  to  be  asserted  by  this  eighth  article  of  the 
Clayton-Bulwer  treaty." — Letter  dated  August  20,  1901, 

In  order  to  be  absolutely  sure  that  the  "general 
principle"  is  reaffirmed  in  the  new  treaty  being  drafted. 
Lord  Lansdowne  suggested  that  Article  3 A,  which  follows, 
be  incorporated: 

"In  view  of  the  permanent  character  of  this  treaty, 
whereby  the  general  principle  established  by  Article  VIII 
of  the  Clayton-Bulwer  convention  is  reaffirmed,  the  high 
contracting  parties  hereby  declare  and  agree  that  the  rules 
laid  down  in  the  last  preceding  article  shall,  so  far  as  they  may 
be  applicable,  govern  all  interoceanic  communications  across 
the  isthmus  ivhich  connects  North  and  South  America,  and 
that  no  change  of  territorial  sovereignty,  or  other  change  of 
circumstances,  shall  affect  such  general  principle  or  the 
obligations  of  the  high  contracting  parties  under  the  present 
treaty." 


22  The  Panama  Tolls  Controversy 

CHOATE  TO  SECRETARY  HAY 

"Lord  Lansdowne's  object  in  insisting  upon  Article 
3A  is  to  be  able  to  meet  the  objectors  in  Parliament  by 
saying  that  although  they  have  given  up  the  Clayton- 
Bulwer  treaty,  they  have  saved  the  ^general  principle,''  and 
have  made  it  immediately  effective  and  binding  upon  the 
United  States  as  to  all  future  routes  and  have  dispensed 
with  future  'treaty  stipulations'  by  making  it  much 
stronger  than  it  was  before.  I  think  his  all-sufficient 
answer  is  that  by  giving  up  the  Clayton-Bulwer  treaty, 
which  stood  in  the  way  of  building  any  canal,  he  has  se- 
cured the  building  of  the  canal  for  the  benefit  of  Great 
Britain  at  the  expense  of  the  United  States,  relieved  Great 
Britain  of  all  responsibility  about  it  now  and  forever, 
and  imposed  upon  the  United  States  stringent  rules  of 
neutrality  as  to  Great  Britain  and  all  mankind." 

CHOATE'S  SUBSTITUTE  FOR  ARTICLE  3A 

"Assuming  that  some  such  article  must  be  retained, 
how  would  this  do:  In  view  of  the  permanent  character 
of  this  treaty,  whereby  the  general  principle  established  by 
Article  VIII  of  the  Clayton-Bulwer  treaty,  is  reaffirmed 
the  United  States  hereby  declares  (and  agrees)  that  it 
will  impose  no  other  charges  or  conditions  of  traffic  upon 
any  other  canal  that  may  be  built  across  the  Isthmus  (or 
between  the  Atlantic  and  Pacific  Oceans)  than  such  as  are 
just  and  equitable,  and  that  such  canals  shall  be  open  to 
the  subjects  and  citizens  of  the  United  States  and  of  all 
other  nations  on  equal  terms." 

The  foregoing  declaration  "that  siich  canals  shall  be  open 
to  the  subjects  and  citizens  of  the   United  States  and  of  all 


Meaning  of    Hay-Pauncefote   Treaty  <ifi 

other  nations  on  equal  terms"  shows  the  equality  contemplated 
by  the  negotiators  of  the  Hay-Pauncefote  treaty.  It  conclu- 
sively shows  that  it  loas  not  intended  to  exempt  any  of  our 
traffic  {coastwise  or  other)  from  the  payment  of  its  propor- 
tio7iate  share  of  tolls. 

Great  Britain  insisted  on  safeguarding  the  '' general 
principle"  from  impairment  even  should  the  United  States 
become  sovereign  of  the  Canal  Zone.  Ambassador  Choate, 
in  a  letter  dated  September  21,  1901,  writes  that  Lord 
Landsowne  stated: 

"It  was  quite  obvious  that  we  might  in  the  future 
acquire  all  the  territory  on  both  sides  of  the  canal;  that 
we  might  then  claim  that  a  treaty  providing  for  the  neu- 
trality of  a  canal  running  through  a  neutral  country  could 
no  longer  apply  to  a  canal  that  ran  through  American 
territory  only;  and  he  again  insisted  that  as  Lord  Lans- 
downe  had  insisted  that  they  must  have  something  to 
satisfy  ParUament  and  the  British  pubUc  that,  in  giving 
up  the  Clayton-Bulwer  treaty,  they  had  retained  and 
reasserted  the  ^general  principle'  principle  of  it;  that  the 
canal  should  be  technically  neutral,  and  should  be  free  to 
all  nations  on  terms  of  equality,  and  especially  that  in  the 
contingency  supposed,  of  the  territory  on  both  sides  of  the 
canal  becoming  ours,  the  canal,  its  neutrality,  its  being 
free  and  open  to  all  nations  on  equal  terms,  should  not  be 
thereby  affected;  that  without  securing  this,  they  could 
not  justify  the  treaty  either  to  Parliament  or  the  public; 
that  the  preamble  which  had  already  passed  the  Senate 
was  not  enough,  although  he  recognized  the  full  import- 
ance of  the  circumstance  of  its  having  so  passed. 

"I  then  called  his  attention  to  your  Article  IV,  in  your 


24  The  Panama  Tolls  Controversy 

letter,  which  did  seem  to  me  to  cover  and  secure  all  that 
he  has  claimed  and  insisted  on.  He  said,  no,  that  it  only 
preserved  the  principle  of  neutralization,  which  it  might  be 
insisted  on  did  not  include  freedom  of  passage  for  all  nations 
and  equality  of  terms  and  that  without  an  explicit  provision, 
which  should  leave  that  free  from  doubts,  he  could  not  expect 
to  sustain  it  before  the  Parliament  and  people.  I  insisted  that 
those  ideas  were  already  included  in  your  fourth,  i.  e.,  within 
the  words,  Hhe  general  principle  of  neutralization,''  especially 
in  the  light  of  that  phrase  as  used  in  the  preamble,  where  it 
is  *  neutralization  established  in  Article  VIII  of  the  Clayton- 
Bulwer  treaty'';  that  if  not  included  within  that,  it  cer- 
tainly was  in  the  phrase,  'obligations  of  the  high  contract- 
ing parties  under  this  treaty,'  for  what  could  be  clearer 
than  our  obligation  by  Article  III  to  keep  it  open  and  on 
terms  of  equality  as  provided  there,  and  what  you  meant 
was  that  no  change  of  territorial  sovereignty  should  affect 
any  of  the  obligations  of  the  present  treaty,  including  that. 
He  still  insisted  that  it  should  not  be  left  to  the  construc- 
tion of  general  clauses,  but  should  be  explicitly  stated. 
Believing  as  I  do  that  you  had  no  thought  of  escaping 
from  the  obligations  of  Article  IH,  Clause  1,  in  any  such 
contingency  as  change  of  territorial  sovereignty,  and  that 
you  had  intended  it  to  be  included  in  your  language  in 
IV,  I  wrote  down  the  words,  'or  the  freedom  of  passage 
of  the  canal  to  the  vessels  of  commerce  and  of  war  of  all 
nations  on  terms  of  entire  equality  and  without  discrim- 
ination, as  provided  by  Article  III,'  and  asked  him  if  those 
words  were  added  to  your  IV  if  it  would  satisfy  him  as  a 
substitute  for  Lord  Lansdowne's  3A.  He  said  it  would, 
and  with  those  words  added  the  treaty  could,  he  thought, 


Meaning  of   Hay-Pauncefote  Treaty  25 

be  sustained  before  Parliament  and  the  British  public; 
that  he  should  approve  it  and  he  thought  Lord  Lansdowne 
could  and  would,  although  it  would  have  to  be  submitted 
to  the  Cabinet  or  to  a  majority  of  its  members." 

Article  IV  of  the  Hay-Pauncefote  treaty,  substituted 
for  the  foregoing  Article  3 A,  reads  as  follows: 

"It  is  agreed  that  no  change  of  territorial  sovereignty 
or  of  international  relations  of  the  country  or  countries  /' 
traversed  by  the  before-mentioned  canal  shall  affect  the 
general  principle  of  neutralization  or  the  obligation  of 
the  high  contracting  parties  under  the  present  treaty," 

In  this  connection.  Senator  Root  properly  observes: 

"The  argument  is  made  that  this  treaty  is  no  longer 
binding  because  there  has  been  a  change  of  sovereignty. 
*  *  *  The  correspondence  shows  that  that  fourth 
article  of  the  treaty  was  put  in  for  the  express  purpose  of 
preventing  any  such  argument." 

CHOATES  SUMMARY 

"I  am  sure  that  in  this  whole  matter,  since  the  receipt 
by  him  of  your  new  draft,  Lord  Lansdowne  has  been  most 
considerate  and  more  than  generous.  He  has  shown  an 
earnest  desire  to  bring  to  an  amicable  settlement,  honor- 
able alike  to  both  parties,  this  long  and  important  con- 
troversy between  the  two  nations.  In  substance  he  abro- 
gates the  Clayton-Bulwer  treaty,  gives  us  an  American 
canal,  ours  to  build  as  and  where  we  like,  to  own,  control 
and  govern,  on  the  sole  condition  of  its  being  always  neutral 
and  free  for  the  passage  of  the  ships  of  all  nations  on  equal 
terms,  except  that  if  we  get  into  a  war  with  any  nation,  we  can 
shut  its  ships  out  and  take  care  of  ourselves." 


26  The  Panama   Tolls  Controversy 

These  excerpts  from  letters  by  Ambassador  Choate 
are  interesting.  They  show  that  the  general  principle  of 
neutraUzation  of  the  Clayton-Bulwer  treaty  is  continued 
unimpaired  and  that  that  obligates  the  United  States  to 
keep  the  Panama  Canal  open  to  nationals  and  non-nation- 
als on  equal  terms.  This  means  that  the  same  tolls  must 
be  levied  on  equal  units  of  traffic  through  the  canal 
without  distinction  of  flag,  and  that  the  American  nego- 
tiators of  the  Hay-Pauncefote  treaty  did  not  intend  to 
reserve  the  right  of  granting  free  transportation  to 
American  shipping — coastwise  and  foreign. 

HENRY  WHITE  TO  SENATOR  McCUMBER 

"My  Dear  Senator  McCumber:  In  reply  to  your 
letter  of  9th  instant,  which  for  reasons  known  to  you  only 
reached  me  three  days  ago,  I  send  you  the  following  brief 
account  of  my  connections  with  the  abrogation  of  the 
Clayton-Bulwer  treaty  and  with  the  negotiations  which 
subsequently  took  place  relative  to  the  Hay-Pauncefote 
treaties. 

"In  the  latter  part  of  December,  1898,  being  then 
charge  d'affaires  to  Great  Britain,  I  received  instructions 
from  Mr.  Hay,  who  had  left  the  London  embassy  a  few 
months  previously  to  become  Secretary  of  State,  to  ap- 
proach the  British  Government  with  a  view  to  ascertaining 
whether,  for  reasons  set  forth  in  his  dispatch,  it  might  not 
be  possible  to  secure  such  modifications  of  the  Clayton- 
Bulwer  treaty  as  would  admit  of  our  Government's  taking 
action  whereby  the  construction  of  an  interoceanic  canal 
under  its  auspices  might  be  accomplished. 

"I,  of  course,  lost  no  time  in  seeking  an  interview 


Meaning  of    Hay-Pauncefotc   Treati/  27 

with  the  late  Marquis  of  Salisbury,  British  Secretary  of 
State  for  Foreign  Affairs  and  also  Prime  Minister,  with 
whom,  on  the  twenty-second  of  December,  I  had  a  long 
and  interesting  conversation  on  the  subject. 

"That  same  afternoon  I  cabled  to  Mr.  Hay  that  there 
seemed  to  be  no  indication  of  opposition,  much  less  hos- 
tility, on  the  part  of  the  British  Government  to  the  con- 
struction by  us  of  the  proposed  canal,  and  if  the  latter 
should  be  available  to  the  ships  of  all  nations  on  equal 
terms  I  felt  that  there  would  be  no  serious  difficulty  in 
effecting  an  agreement  satisfactory  to  both  nations. 

"I  should  be  happy  to  inclose  copies  of  Mr.  Secretary 
Hay's  instructions,  of  my  dispatch  in  reply,  and  of  my 
cablegram  aforesaid,  were  it  not  improper  for  me  to  do  so 
without  the  permission  of  the  Department  of  State.  And, 
Indeed,  a  detailed  account  of  my  interview  with  Lord 
Salisbury  would  unduly  extend  the  dimensions  of  this 
letter. 

"Its  substance  was,  however,  that  he  would  be  unable 
to  give  an  oflScial  reply  to  my  Government's  suggestions 
until  he  had  given  the  subject  careful  consideration  and 
had  conferred  with  the  board  of  trade  and  other  depart- 
ments of  the  British  Government.  But  he  gave  me  to 
understand,  confidentially,  that  in  his  opinion  it  was  de- 
sirable such  a  canal  be  constructed ;  that  a  work  so  colossal 
could  only  be  carried  to  a  successful  issue  by  a  great  power, 
and  that  the  United  States  was  that  power.  Lord  Salis- 
bury intimated,  furthermore — also  in  confidence — that 
the  British  Government  would  not,  after  due  consideration 
of  the  question,  refuse  to  modify  such  provisions  of  the 
Clayton-Bulwer  treaty  as  stood  in  the  way  of  our  making 


28  The  Panama  Tolls  Controversy 

the  canal,  provided  the  ships  of  all  nations  should  be 
guaranteed  the  use  thereof  on  equal  terms — a  condition 
which  he  strongly  emphasized. 

"You  are  aware  of  the  negotiations  for  a  new  treaty 
which  were  entered  upon  shortly  afterwards  by  Mr.  Hay 
and  Lord  Pauncefote,  and  the  result  thereof  was  the  first 
Hay-Pauncefote  treaty,  to  certain  features  of  which  the 
Senate  refused  its  approval. 

"The  reasons  for  the  Senate's  action  were  for  some 
time  misunderstood  in  Great  Britain  and  created  a  certain 
amount  of  feeling  there,  which  reacted  upon  this  country 
and  caused  a  certain  amount  of  tension. 

"During  that  period  I  crossed  the  ocean  several  times 
and  had  private  conversations  with  a  number  of  the  lead- 
ing men  of  both  countries,  with  a  view  to  explaining  what 
each  really  wanted,  and  to  doing  away  with  the  misunder- 
standings which  had  arisen  in  that  connection.  I  well 
remember  discussing  the  questions  at  issue  with  several 
of  the  leading  Senators  of  that  day,  of  whom  none,  save 
Senator  Lodge,  are  now  members  of  that  body;  and 
among  the  many  subjects  touched  upon  I  can  remember 
no  allusion  whatever  to  the  use  of  the  canal  without 
payment  of  tolls  by  our  vessels  engaged  in  the  coasting 
trade. 

"Eventually,  as  you  may  remember,  negotiations 
were  renewed  for  another  treaty  to  take  the  place  of  the 
one  to  which  the  Senate  had  objected.  These  negotia- 
tions were  conducted  for  the  most  part  in  London  by 
Mr.  Choate  and  Lord  Pauncefote,  who  was  in  England 
on  leave  of  absence,  and  whom  Lord  Lansdowne,  the 
successor  of  Lord  Salisbury  as  minister  of  foreign  affairs. 


Meaning  of   Hay-Pauncefote  TreaUj  '2J) 

had  deputed  to  act  in  his  behalf  with  regard  to  the  details 
of  the  proposed  arrangement. 

"I  was  in  constant  touch,  as  secretary  of  the  embassy, 
with  these  negotiations;  each  phase  of  which  Mr.  Choate 
was  good  enough  to  tell  me  of.  Indeed  I  was  often  pres- 
ent during  their  discussion  of  the  questions  at  issue, 
which  took  place  for  the  most  part  at  the  embassy;  and 
I  never  heard  the  exemption  of  our  coastwise  shipping 
from  the  payment  of  tolls  mentioned  in  any  connection. 

"I  have,  furthermore,  since  the  receipt  of  your  letter, 
looked  carefully  over  the  many  private  and  confidential 
letters  which  Mr.  Hay  and  I  wrote  to  each  other  from  the 
time  that  he  became  Secretary  of  State  until  his  death. 
They  deal  fully  with  public  affairs,  both  domestic  and 
international,  but  among  the  many  references  to  the 
canal  treaties  and  other  questions  pertaining  thereto,  I 
can  find  no  allusion  whatever  to  the  exemption  of  our 
coastwise  trading  vessels  from  the  payment  of  tolls. 

"Under  these  circumstances  there  is  but  one  way 
in  which  I  can  answer  the  inquiry  contained  in  your  letter 
— 'as  to  the  understanding  of  Mr.  Hay  and  Lord  Paunce- 
fote  on  the  question  of  the  use  of  the  canal  by  vessels 
engaged  wholly  in  the  coastwise  trade' — to  wit: 

"(1)  That  the  exemption  of  our  coastwise  shipping 
from  the  payment  of  tolls  was  never  suggested  to,  nor  by, 
anyone  connected  with  the  negotiation  of  the  Hay- 
Pauncefote  treaties  in  this  country  or  in  England; 

"  (2)  That,  from  the  day  on  which  I  opened  the  nego- 
tiations with  Lord  Salisbury  for  the  abrogation  of  the 
Clayton-Bulwer  treaty  until  the  ratification  of  the  Hay- 
Pauncefote  treaty,   the  words   'all   nations'   and   'equal 


30  The  Panama   Tolls  Controversy 

terms'  were  understood  to  refer  to  the  United  States  as 
well  as  to  all  other  nations,  by  every  one  of  those,  whether 
American  or  British,  who  had  anything  to  do  with  the 
negotiations  whereof  the  treaty  last  mentioned  was  the 
result." 

The  views  herein  expressed  are  in  complete  accord 
with  those  of  Ex-Ambassador  Choate  to  the  effect  that 
free  transportation  to  American  coastwise  shipping  is  in 
violation  of  the  Hay-Pauncefote  treaty. 

HENRY  WHITE  TO  SENATOR  SIMMONS 

"The  Washington  Post  of  yesterday  quotes  former 
Senator  Foraker  as  saying:  'I  have  personal  knowledge 
that  both  Mr.  Hay  and  Mr.  Henry  White  had  full  knowl- 
edge of  what  the  Senate  demanded  and  supposed  we 
were  getting,'     *     *     * 

"As  I  am  leaving  tomorrow  for  Germany,  and  may 
not  see  you  again  for  some  time,  I  think  it  well  to  let  you 
know  that  I  agree  with  that  statement.  I  not  only  am 
under  the  impression  that  I  knew  the  reasons  which 
caused  the  Senate  to  object  to  certain  provisions  of  the 
first  Hay-Pauncefote  treaty,  but  I  am  in  sympathy  with 
that  body's  action.  I  had  no  reason,  however,  to  sup- 
pose from  anything  said  to  me  by  any  Senator  or  by 
anyone  else  that  the  use  of  the  canal  by  our  vessels 
engaged  in  the  coasting  trade  without  payment  of  tolls 
had  any  connection  therewith. 

"Mr.  Foraker  is  one  of  the  Senators  referred  to  in 
my  letter  to  Senator  McC  umber  and  in  my  statement 
to  the  committee,  with  whom  I  had  conversations  after 
the  rejection  of  the  first  Hay-Pauncefote  treaty.     I  well 


Meaning  of   Haij-Pauncefofc   Treaty  iU 

remember  an  interesting  interview  which  I  had  with 
him  in  1901  at  his  house  in  Washington,  and  during 
which  we  went  into  what  I  supposed  to  be  all  of  the 
questions  at  issue  between  the  two  Governments;  but 
as  far  as  I  can  recollect,  no  allusion  was  made  by  either 
the  Senator  or  me  to  the  exemption  of  our  vessels  from 
the  payment  of  tolls  in  passing  through  the  Panama 
Canal." 

CHOATE  TO  SECRETARY  HAY 

"In  this  situation,  as  I  do  not  see  anything  likely 
to  be  required  of  me  that  may  not  be  just  as  well  done  by 
Mr.  White,  who  knows  your  mind  and  mine  exactly,  and 
has  been  fully  advised  of  all  that  has  been  done,  I  propose 
to  keep  my  long-cherished  purpose  of  sailing  on  the 
Philadelphia  on  Saturday,  the  12th,  unless  something 
to  the  contrary  turns  up  in  the  meantime.  Quite  pos- 
sibly I  may  hear  before  Saturday  that  Lord  Salisbury 
has  approved." 

This  statement  of  Ambassador  Choate  shows  that 
any  statement  made  by  Henry  White  on  the  tolls  ques- 
tion is  entitled  to  great  weight.  The  following  paragraph 
from  Representative  Stevens'  great  speech  in  the  House 
in  favor  of  the  tolls-exemption  repeal  bill  appropriately 
concludes  the  foregoing  by  Henry  White: 

"Only  a  few  weeks  ago  Hon.  Henry  Wliite  delivered 
an  address  in  W^ashington,  in  which  he  clearly  and  strongly 
affirmed  the  terms  stated  in  the  original  note  and  corre- 
spondence, that  the  intention  always  existed  on  the  part 
of  all  the  officials  of  both  Governments  that  vessels  of 
commerce   of   both   and   all    nations   should   always   be 


32  The  Panama  Tolls  Controversy 

treated  on  terms  of  entire  equality.  This  would  include 
all  trade — foreign  and  coastwise.  Mr.  White  has  a  more 
intimate  knowledge  of  the  actual  transactions  than  any 
living  man,  and  his  statement  should  be  conclusive  with 
fair  and  just  men.'" 

"Even  more  direct  and  convincing  is  the  evidence  of 
Willis  Fletcher  Johnson,  a  journalist  of  the  highest  stand- 
ing, who  recalls  distinctly  a  conversation  with  Secretary 
Hay  in  1904  to  this  effect: 

I  asked  Colonel  Hay  plumply  if  the  treaty  meant  what  it 
appeared  to  mean  on  its  face,  and  whether  the  phrase,  vessels  of 
all  nations,  was  intended  to  include  our  own  shipping,  or  was 
to  be  interpreted  as  meaning  all  other  nations.  The  Secretary 
smiled,  half  indulgently,  half  quizzically,  as  he  replied: 

All  means  all.  The  treaty  was  not  so  long  that  we  could  not 
^  have  made  room  for  the  word  other  if  we  had  imderstood  that  it 
belonged  there.  All  nations  means  all  nations,  and  the  United 
States  is  certainly  a  nation. 

That  was  the  understanding  between  yourself  and  Lord 
Pauncefote  when  you  and  he  made  the  treaty?  I  pursued. 

It  certainly  was,  he  replied.  It  was  the  understanding  of 
both  Governments,  and  I  have  no  doubt  that  the  Senate  realized 
that  in  ratifying  the  second  treaty  without  such  an  amendment 
it  was  committing  us  to  the  principle  of  giving  all  friendly  nations 
equal  privileges  in  the  canal  with  ourselves.  That  is  our  Golden 
Rule." — Harvey. 

The  following  by  Senator  Lodge  is  now  apropos : 
"Whatever  our  opinion  may  be  as  to  the  strict  legal 
interpretation  of  the  rules  governing  the  matter  of  tolls 
imposed  upon  vessels  passing  through  the  canal,  we  cannot 
and  we  ought  not  to  overlook  the  understanding  of  those 
who  negotiated  the  treaty  as  to  the  intent  and  effect  of 
the  rules  which  they  framed.  As  to  the  nature  of  the  un- 
derstanding we  have  direct  testimony.    Mr.  Henry  White, 


Meaning  of   Hay-Pauncefote  Treaty  JJ3 

who  first  laid  before  the  British  Government  the  desire 
of  the  United  States  to  enter  into  negotiations  for  the 
supersession  of  the  Clayton-Bulwer  treaty,  has  stated 
that  Lord  Salisbury  expressed  to  him  the  entire  willing- 
ness of  England  to  remove  all  obstacles  which  the  Clayton- 
Bulwer  treaty  put  in  the  way  of  the  construction  of  the 
canal,  and  desired  only  to  maintain  equality  of  tolls 
imposed  upon  all  vessels,  including  those  of  the  United 
States.  Mr.  Choate,  who  completed  the  negotiations 
which  resulted  in  the  second  Hay-Pauncefote  treaty,  has 
publicly  stated  that  the  understanding  at  that  time  of 
both  parties  was  the  same  as  that  given  by  Mr.  White. 
The  only  other  American  concerned  in  the  actual  negotia- 
tion of  the  treaty  was  the  late  Mr.  Hay,  at  that  time  Secre- 
tary of  State.  I  know  that  Mr.  Hay's  view  was  the  same 
as  that  of  Mr.  Choate  and  Mr.  White.  It  is  therefore 
clear  on  the  testimony  of  our  three  negotiators  that  the 
negotiations  as  they  were  begun  and  as  they  were  com- 
pleted in  the  second  Hay-Pauncefote  treaty  proceeded 
on  the  clear  understanding  that  there  was  to  be  no  dis- 
crimination in  the  tolls  imposed  as  between  the  vessels 
of  any  nation,  including  the  vessels  of  the  United  States." 

Senator  Root  states : 

"The  Hay-Pauncefote  treaty  came  before  the  Senate 
in  two  forms:  First,  in  the  form  of  an  instrument  signed 
on  the  fifth  of  February,  1900,  w^hich  was  amended  by  the 
Senate;  and,  second,  in  the  form  of  an  instrument  signed 
on  the  eighteenth  of  November,  1901,  which  continued 
the  greater  part  of  the  provisions  of  the  earlier  instru- 
ment, but  somewhat  modified  or  varied  the  amendments 


34  The  Panama   Tolls  Controversy 

which  had  been  made  by  the  Senate  to  that  earlier 
instrument. 

"It  is  really  but  one  process  by  which  the  paper  sent 
to  the  Senate  in  February,  1900,  passed  through  a  course 
of  amendment;  first,  at  the  hands  of  the  Senate,  and  then 
at  the  hands  of  the  negotiators  between  Great  Britain  and 
the  United  States,  with  the  subsequent  approval  of  the 
Senate.  In  both  the  first  form  and  the  last  of  this  treaty 
the  preamble  provides  for  preserving  the  provisions  of 
Article  VIII  of  the  Clayton-Bulwer  treaty.  Both  forms 
provide  for  the  construction  of  the  canal  under  the  aus- 
pices of  the  United  States  alone  instead  of  its  construction 
under  the  auspices  of  both  countries.     *     *     * 

"The  treaty  as  it  was  finally  agreed  to  provides  that 
the  United  States  'adopt,  as  the  basis  of  such  neutraliza- 
tion of  such  ship  canal,'  the  following  rules,  substantially 
as  embodied  in  the  convention  'of  Constantinople,  signed 
the  twenty-ninth  of  October,  1888,'  for  the  free  naviga- 
tion of  the  Suez  Maritime  Canal ;  that  is  to  say : 

"The  canal  shall  be  free  and  open  *  *  *  to  the 
vessels  of  commerce  and  of  war  of  all  nations  'observing 
these  rules  on  terms  of  entire  equality,  so  that  there  shall 
be  no  discrimination  against  any  nation  or  its  citizens  or 
subjects  in  respect  to  the  conditions  or  charges  of  traffic, 
or  otherwise.'    Such  conditions  and  charges  of  traffic  shall 

be  just  and  equitable. 

*         *         * 

"That  rule  must,  of  course,  be  read  in  connection  with 
the  provision  for  the  preservation  of  the  principle  of  neu- 
tralization established  in  Article  VIII  of  the  Clayton- 
Bulwer    convention.      The    principle    of    neutralization 


Meaning  of    Hay-Panncefote  Trcalj/  .'Jo 

provided  lor  by  the  eighth  article  is  neutraUzation  upon 
terms  of  absolute  equality  both  between  the  United 
States  and  Great  Britain  and  between  the  United  States 
and  all  other  powers." 

The  '' general  principle''  of  neutralization  clearly 
means  this : 

"It  is  always  understood  by  the  United  States  and 
Great  Britain  that  the  parties  constructing  or  owning 
the  canal  shall  impose  no  other  charges  or  conditions  of 
traffic  thereupon  than  are  just  and  equitable;  and  that  the 
same  canals  or  railways,  being  open  to  the  citizens  and  sub- 
jects of  the  United  States  and  Great  Britain  on  equal 
terms,  shall  also  be  open  on  like  terms  to  the  citizens  and 
subjects  of  every  other  State." 

In  a  letter  of  date  August  3,  1901,  Lord  Lansdowne, 
with  great  perseverance,  seeks  to  guard  against  any 
possible  modification  of  that  ''general  principle"  which 
related  to  the  equality  of  treatment  of  the  vessels  of  all 
nations. 

Secretary  Hay  assured  him  that: 

"The  President  was  not  only  willing  but  desirous 
that  'the  general  principle'  of  neutralization  referred  to 
in  the  preamble  of  this  treaty  should  be  applicable  to  this 
canal  now  intended  to  be  built,  notwithstanding  any 
change  of  sovereignty  or  of  international  relations  of  the 
territory  through  which  it  should  pass." 

This  resulted  in  agreement  on  Article  IV  of  the 
present  treaty,  namely : 

"It  is  agreed  that  no  change  of  territorial  sovereignty 
or  of  the  international  relations  of  the  country  or  countries 
traversed  by  the  before-mentioned  canal  shall  affect  the 


36  The  Panama   Tolls  Controversy 

general  principle  of  neutralization  or  the  obligation  of  the 
high  contracting  parties  under  the  present  treaty." 

"Thus  it  will  be  seen  that  Great  Britain  was  most 
insistent  that  the  'general  'principle'  of  the  Clayton-Bulwer 
treaty,  without  modification,  should  be  continued,  and  this 
country  at  that  time  asserted  that  that  was  also  its  purpose 
that  it  should  not  be  changed  or  impaired. 

"In  a  letter  from  Lord  Lansdowne  to  Lord  Pauncefote, 
ambassador  to  the  United  States,  of  date  February  22, 
1901,  this  determination  to  agree  to  a  modification  of  the 
Clayton-Bulwer  treaty  only  upon  condition  that  this 
'general  principW  just  as  it  appeared  in  the  Clayton-Bulwer 
treaty,  and  without  impairment,  should  be  continued 
everywhere  finds  expression." 

Senator  McCumber  says: 

"We  have  conclusive  evidence  of  what  Mr.  Hay,  Mr. 
Choabe,  Mr.  White,  Lord  Pauncefote,  Lord  Lansdowne 
and  all  those  connected  with  the  negotiations  understood 
the  treaty  to  mean.  We  have  the  direct  assertion  of  both 
Lansdowne  and  Hay  that  'ships  of  all  nations,  on  terms  of 
equality  without  discrimination'  was  intended  to  mean  just 
the  same  in  the  Hay- Pauncefote  treaty  that  it  meant  in  the 
Clayton-Bulwer  treaty,  without  impairment" 

We  are  not  at  liberty  to  put  a  construction  upon  the 
Hay-Pauncefote  treaty  which  violates  the  controlling 
declaration  of  absolute  equality  between  the  citizens  and 
subjects  of  Great  Britain  and  the  United  States,  assured 
to  Great  Britain  in  the  "general  principle"'  found  in 
Article  VIII  of  the  Clayton-Bulwer  treaty,  which  "gen- 
eral principle"  was  not  superseded  but  was  continued 
unimpaired  in  the  Hay-Pauncefote  treaty. 


Meaning  of   Hay-Paunccfotc   Treaty  S7 

VIEWS    OF    REPRESENTATI\'E    FREDERICK    C.    STEVENS 

OF  MINNESOTA  AND  EXTRACTS  FROM  THE  DAVIS 

REPORT,  PRINTED  AS  PART  OF  HIS  SPEECH 

"The  one  document  in  which  the  facts  are  best  set 
forth  is  the  report  of  Senator  Cushman  K.  Davis,  of  Minne- 
sota, the  c^iairman  of  the  Senate  Committee  on  Foreign 
Relations,  presenting  to  the  Senate  the  first  Hay-Paunce- 
fote  treaty.  *  *  *  jf  tjjg  time  shall  come  when  it 
will  be  necessary  for  our  Government  to  contend  before 
an  international  tribunal  concerning  our  rights  and  obli- 
gations and  duties  under  these  isthmian  treaties,  this  re- 
port of  Senator  Davis  will  be  the  best  e\ddence  and  almost 
conclusive  evidence  that  by  the  terms  of  them  the  United 
States  is  bound  to  give  equal  rights  to  all  nations  and  to 
all  commerce  and  all  citizens  in  the  use  of  this  transoceanic 
waterway.     *     *     * 

"There  is  a  personal  aspect  to  this  discussion  as  to  the 
views  and  attitude  of  Senator  Davis  which  I  ask  leave  of 
the  House  to  discuss  and,  I  think,  settle  right  here.  It  has 
been  stated  in  debate  here  and  elsewhere  and  in  various 
reports,  that  Senator  Da\as  believed  this  Hay-Pauncefote 
treaty  allowed  discrimination  in  favor  of  our  coastwise 
commerce  as  against  other  nations.  Various  sincere  and 
honorable  gentlemen  have  stated  from  their  recollection 
of  his  position,  that  such  was  his  opinion.  I  had  the  pleas- 
ure of  knowing  Senator  Davis  very  intimately  and  for 
many  years,  and  my  recollection  is  entirely  to  the  contrary. 
I  did  not  desire  to  rest  on  my  own  memory,  so  I  have  re- 
enforced  it  by  consulting  those  who  were  most  intimate 
with  him,  his  business,  personal  and  social  associates, 


38  The  Panama  Tolls  Controversy 

and  their  recollection  in  every  respect  agi'ees  with  my  own. 
But,  of  course,  this  is  merely  a  difference  of  opinion  and 
recollection  among  equally  sincere  and  honest  men  as  to 
a  matter  which  occurred  several  years  ago,  so  frequently 
found  in  the  experience  of  all  of  us.  But  fortunately  there 
are  records  which  lift  the  difference  out  of  the  realm  of 
mere  recollection  and  settle  it  by  what  Senator  Davis  in 
his  own  writings  and  in  his  own  record,  has  stated  what  he 
actually  did  believe.  *  *  *  j  know  you  will  agree 
with  me  from  them,  that  he  believed  that  this  waterway 
should  be  constructed  and  operated  on  terms  of  treatment 
of  entire  equality  of  the  citizens  and  commerce  of  all 

nations. 

*        *        * 

That  the  United  States  sought  no  exclusive  privilege  or 
preferential  right  of  any  kind  in  regard  to  the  proposed  com- 
munication, and  their  sincere  wish,  if  it  should  be  found  prac- 
tical, was  to  see  it  dedicated  to  the  common  use  of  all  nations 
on  the  most  liberal  terms  and  a  footing  of  perfect  equality  for  all. 

That  the  United  States  would  not,  if  they  could,  obtain 
any  exclusive  right  or  privilege  in  a  great  highway  which 
naturally  belongs  to  all  mankind. 

That  while  they  aim  at  no  exclusive  privilege  for  them- 
selves, they  could  never  consent  to  see  so  important  a  com- 
mimication  fall  under  the  exclusive  control  of  any  other  great 
commercial  power. 

:|c  «  « 

In  the  origin  of  our  claim  to  the  right  of  way  for  our  people 
and  our  produce,  armies,  mails  and  other  property  through  the 
canal,  we  offer  to  dedicate  the  canal  to  the  equal  use  of  mankind. 

As  to  neutraUty  and  the  exclusive  control  of  the  canal  and 
its,  dedication  to  univei-sal  use,  the  suggestions  that  were  in- 
corporated in  the  Clayton-Bulwer  treaty  came  from  the  United 
States  and  were  conciured  in  by  Great  Britain.  In  no  instance 
has  the  Government  of  the  United  States  intimated  an  objection 
to  this  treaty  on  account  of  the  features  of  neutrahty,  its  equal 
and  impartial  use  by  all  other  nations. 


Meaning  of   Hay-Pauncefoie  Treafy  39 

Thu3  the  United  States  from  the  beginning,  before  the  Chiy- 
ton-Biilwcr  treaty,  took  the  same  ground  that  is  reached  in  the 
convention  of  February,  1900,  for  the  universal  decree  of  the 
neutral,  free  and  innocent  use  of  the  canal  as  a  worldly  highway, 
where  war  should  not  exist  and  where  the  honor  of  all  nations 
would  be  a  safer  protection  than  fortresses  for  its  security .  From 
that  day  to  this  these  wise  forecasts  have  been  fulfilled,  and 
Europe  has  adopted  in  the  convention  of  Constantinople  the 
same  great  safeguard  for  the  canal  that  was  projected  by  Mr. 
Cass  in  1857. 

No  American  statesman,  speaking  with  official  authority 
or  responsibihty,  has  ever  intimated  that  the  United  States 
would  attempt  to  control  this  canal  for  the  exclusive  benefit  of 
our  Government  or  people.  They  have  all,  with  one  accord, 
declared  that  the  canal  was  to  be  neutral  ground  in  time  of  war 
and  always  open  on  terms  of  impartial  equity  to  the  ships  and 
commerce  of  the  world. 

*        *        * 

The  United  States  cannot  take  an  attitude  of  opposition 
to  the  principles  of  the  great  act  of  October  22,  1888,  without 
discrediting  the  official  declarations  of  our  Government  for  fifty 
years  on  the  neutrality  of  an  isthmian  canal  and  its  equal  use  by 
all  nations,  without  discrimination. 

To  set  up  the  selfish  motive  of  gain  by  establishing  a  monop- 
oly of  a  highway  that  must  derive  its  income  from  the  patronage 
of  all  maritime  countries  would  be  unworthy  of  the  United  States 
if  we  owned  the  country  through  which  the  canaJ  is  to  be  built. 

But  the  location  of  the  canal  belongs  to  other  Governments, 
from  whom  we  must  obtain  any  right  to  construct  a  canal  on 
their  territory,  and  it  is  not  unreasonable,  if  the  question  was 
new  and  was  not  involved  in  a  subsisting  treaty  with  Great 
Britain,  that  she  should  question  the  right  of  even  Nicaragua 
and  Costa  Rica  to  grant  to  our  ships  of  commerce  and  of  war 
extraordinary  privileges  of  transit  through  the  canal. 

It  is  not  reasonable  to  suppose  that  Nicaragua  and  Costa 
Rica  would  grant  to  the  United  States  the  exclusive  control  of  a 
canal  through  those  States  on  terms  less  generous  to  the  other 
maritime  nations  than  those  prescribed  in  the  great  act  of  Octo- 
ber 22,  1888;  or,  if  we  could  compel  them  to  give  us  such  ad- 
vantages over  other  nations,  it  would  not  be  creditable  to  our 
country  to  accept  them.     *     *     * 


40  The  Panama  Tolls  Controversy 

In  time  of  war  as  in  time  of  peace  the  commerce  of  the 
world  will  ppss  through  its  portals  in  perfect  security,  enriching 
all  nations  and  we  of  the  English-speaking  people  will  either 
forget  that  this  grand  work  has  ever  cost  us  a  day  of  bitterness; 
or  we  will  rejoice  that  our  contentions  have  delayed  our  progress 
until  the  honor  has  fallen  to  our  grand  Republic  to  number  this 
among  our  best  works  for  the  good  of  mankind. 

"In  this  report  the  Senator  quoted  at  some  length 
from  the  letter  of  the  Secretary  of  State  Clayton  to  Minis- 
ter Rives,  of  France,  in  the  framing  of  the  first  Clayton- 
Bulwer  treaty.  He  evidently  desired  to  emphasize  what 
he  considered  the  most  important  thoughts  in  the  letter 
and  so  has  italicized  and  underscored,  evidently  with  his 
own  hand,  what  he  desired  should  be  especially  kept  in 
mind.  I  will  read  these  paragraphs  so  you  can  judge 
exactly  what  Senator  Davis  believed  to  be  of  the  greatest 
importance: 

That  the  United  States  sought  no  exclusive  privilege  or 
preferential  right  0/  any  kind  in  regard  to  the  proposed  com- 
munication, and  their  sincere  wish,  if  it  should  be  found  prac- 
ticable, was  to  see  it  dedicated  to  the  common  use  of  all  nations  on 
the  most  liberal  terms  and  a  footing  of  perfect  equality  for  all. 

That  the  United  States  would  not,  if  they  could,  obtain  any 
exclusive  right  or  privilege  in  a  great  highway  which  naturally 
belonged  to  all  mankind. 

That  while  they  aimed  at  no  exclusive  privilege  for  them- 
selves, thej'^  could  never  consent  to  see  so  important  a  com- 
munication fall  under  the  exclusive  control  of  any  other  great 
commercial  power. 

"You  will  note  from  these  emphasized  sentences  that 
Senator  Davis  believed  not  only  that  we  did  not  intend 
any  discriminative  treatment  in  the  use  of  the  canal,  but 
he  further  believed  it  would  be  dishonorable  to  so  do, 

"When  Senator  Davis  considered  this  treaty,  and  his 


Meaning  of   Hay-Pauncefote  Treaty  41 

statement  was  he  had  given  much  consideration  to  it, 
he  beHeved  that  it  did  not  fully  protect  the  rights  of  the 
United  States,  so  he  prepared  what  is  known  as  the  Davis 
amendment,  as  follows: 

Your  committee  therefore  report  the  following  amendment 
to  the  pending  treaty: 

Insert,  at  the  end  of  Section  5  of  Article  II,  the  following: 
It  is  agreed,  however,  that  none  of  the  immediately  fore- 
going conditions  and  stipulations  in  sections  numbered  1,  2,  3, 
4  and  5  of  this  article  shall  apply  to  measures  which  the  United 
States  may  find  it  necessary  to  take  for  securing,  by  its  own 
forces,  the  defense  of  the  United  States  and  the  maintenance  of 
pubUc  order. 

"The  very  basis  for  this  amendment,  the  very  founda- 
tion for  its  consideration,  was  that  these  paragraphs, 
1,  2,  3,  4  and  5,  did  apply  to  and  bind  the  United  States, 
and  because  they  did  so  apply  and  bind  our  Government, 
Senator  Davis  did  not  believe  they  should  be  construed 
to  prevent  the  United  States  doing  as  it  found  necessary 
for  its  own  defense.  So  he  prepared  this  amendment, 
based  on  the  contention  that  paragraph  1  did  apply  to  the 
United  States.  Now,  here  is  paragraph  1,  which  under 
this  amendment  did  apply  to  the  United  States : 

1.  The  canal  shall  be  free  and  open,  in  time  of  war  as  in 
time  of  peace,  to  the  vessels  of  commerce  and  of  war  of  all 
nations  on  terms  of  entire  equahty,  so  that  there  shall  be  no 
discrimination  against  any  nation,  or  its  citizens  or  subjects, 
in  respect  of  the  conditions  or  charges  of  traffic,  or  otherwise. 

"This  obligation,  then,  applied  to  the  United  States, 
and  under  it  'vessels  of  all  nations'  must  be  treated  on 
terms  of  entire  equality  and  there  could  be  'no  discrimina- 
tion in  favor  of  any  nation,  its  citizens  or  its  subjects,  as 
to  the  charges  or  conditions  of  traffic,  or  otherwise.'    That 


42  The  Panama   Tolls  Controversy 

amendment  was  based  on  the  proposition  admitted  by 
everybody  that  the  United  States  was  one  of  those  nations 
to  which  this  section  apphed,  under  which  it  could  not 
receive  any  discrimination  and  must  be  treated  with 
'entire  equality.' 

"That  amendment  came  before  the  Senate  for  a  vote, 
and  here  is  its  result:  Yeas,  65;  nays,  17." 

Representative  Stevens  concludes  as  follows : 
"Sixty-five  Senators  declared  that  the  United  States 
was  one  of  'all  nations,'  and  could  not  have  any  discrimi- 
nation, and  this  record  cannot  be  impeached  as  to  its 
contents  and  the  logical  conclusion  to  be  deduced  from  it." 

We  will  continue  the  narrative  with  excerpts  from  a 
speech  by  Senator  McCumber.  The  foregoing  excerpts 
from  the  Davis  report  are  also  found  in  this  speech, 
and  so  should  be  considered  a  part  of  these  excerpts. 
The  following  sentence  from  the  Davis  report  is  a  suit- 
able introduction  to  the  long  quotation  from  the  Senator's 
speech : 

The  Suez  Canal  makes  no  discrimination  in  its  tolls  in 
favor  of  its  stockholders.  *  *  *  ^^^j^  taking  its  profits  or 
the  half  of  them  as  our  basis  of  calculation,  we  will  never  find 
it  necessary  to  differentiate  our  rates  of  toll  in  favor  of  our  own 
people  in  order  to  secure  a  very  great  profit  on  the  investment. 

"There  is  the  foundation  upon  which  we  based  our 
belief  at  that  time  that  we  should  bind  ourselves  to  accord 
the  same  treatment  to  our  vessels  as  we  should  accord  to 
the  vessels  of  the  world.  Before  us  at  that  time  was  a 
schedule  of  rates  of  toll  that  could  be  charged,  an  estimate 
of  the  number  of  vessels,  including  our  vessels  engaged  in 
foreign  trade  and  our  coastwise  vessels,  which  would  make 


Meaning  of    Hay-Pauncefote   Treaty  4.S 

use  of  the  canal,  and  upon  that  we  made  our  estimate 
of  the  value  of  the  canal.  With  that  explanation  Senator 
Davis  said  we  were  to  treat  every  nation  the  same  as  we  treated 
our  own  and  to  rely  for  our  compensation  on  our  investment 
upon  the  tolls  and  upon  the  special  benefit  of  being  brought 
closer  to  our  sea  possessions. 

"Senator  Davis  declared  in  that  report  before  the 
Senate  that  we  furnished  the  money  to  build  that  canal 
as  a  venture;  that  we  took  the  chance  of  whether  it  would 
be  profitable  or  unprofitable;  that  we  were  not  compelled 
to  divide  our  profits  with  the  nations  of  the  world  if  it 
were  profitable,  nor  to  call  upon  the  nations  of  the  world 
if  it  did  not  prove  a  success.  We  believed  that  it  would 
prove  a  success.  The  reports  that  had  been  made  to  us 
upon  the  basis  of  one-half  of  the  tolls  of  the  Suez  Canal 
assured  us  that  it  would  be  a  success.  That  calculation 
took  into  consideration  tolls  on  our  coastwise  vessels. 

"What  could  the  Senate  have  understood?  What 
could  any  Senator  have  understood  by  the  words: 

We  will  never  find  it  necessary  to  differeniiaie  our  rates 
of  toll  in  favor  of  our  own  people  in  order  to  secure  a  very 
great  profit  on  the  investment. 

"Let  me  ask  Senators  candidly:  Did  or  did  not  those 
words  mean  that  this  treaty  prohibited  us  from  differ- 
entiating between  our  own  vessels  and  the  vessels  of  other 
nations?  If  it  did  not  so  mean,  then  what  on  earth  did 
it  mean;  and  what  did  Senator  Davis  mean  when  he  used 
those  words?  Can  you  make  a  declaration  of  construction 
stronger  or  more  emphatic  than  these  words  make  that 
construction? 

"No,  Hie  all  understood;    Mr.    tlay  understood.  Lord 


44  The  Panama  Tolls  Controversy 

Pauncefote  understood,  and  the  Senate  of  the  United  States 
understood  that  under  the  terms  of  this  treaty  we  could  not 
differentiate  between  our  own  ships  and  the  ships  of  foreign 
countries.  That  declaration  was  the  keynote  of  the  elo- 
quent address  that  was  made  by  Senator  Davis.  I  cannot 
pass  from  his  declaration  without  inserting  his  final  elo- 
quent tribute  to  this  great  project: 

In  time  of  war,  as  in  times  of  peace,  the  commerce  of  the 
world  will  pass  through  its  portals  in  perfect  security,  enriching 
all  the  nations,  and  we  of  the  English-speaking  peoples  will  either 
forget  that  this  grand  work  has  ever  cost  us  a  day  of  bitterness, 
or  we  will  rejoice  that  our  contentions  have  delayed  our  progress 
until  the  honor  has  fallen  to  our  grand  Republic  to  number  this 
among  our  best  works  for  the  good  of  mankind. 

"For  the  good  of  mankind  was  our  glorious  boast  in 
1900.  For  the  special  good  of  ourselves  and  mankind  be 
damned  is  the  construction  ice  seek  to  place  upon  that  treaty 
in  1914.     *     *     * 

"Senator  Morgan  submitted  a  minority  report;  and 
although  he  differed  with  the  majority  upon  certain  ques- 
tions, that  eminent  scholar  and  historian  agreed  entirely 
with  the  report  of  the  majority  when  he  said: 

The  treaty  under  consideration  is  for  the  avowed  purpose  of 
removing  any  objection  that  may  arise  out  of  the  convention  of 
April  19,  1850,  commonly  called  the  Clayton-Bulwer  treaty,  to 
the  construction  of  such  canal  under  the  auspices  of  the  United 
States,  without  impairing  the  general  principle  of  neutralization 
established  in  Article  VIII  of  that  convention. 

That  general  principle,  as  it  is  modified  or  specially  defined 
in  this  treaty,  is  all  that  is  left  of  the  Clajiion-Bulwer  treaty,  as 
now  being  in  continuing  force. 

"There  was  no  misunderstanding  as  to  what  that 
general  principle  was.    Says  Senator  Morgan  in  his  report: 


Meaninr/  of    Haij-Pauncefote   Treaty  45 

All  that  is  left  of  this  general  treaty  is  the  general  principle 
provided  in  Article  VIII  of  the  Clayton-Bulwer  treaty.  That  is, 
that  the  vessels  of  all  nations  using  the  canal  should  be  treated  voiih 
exact  equality,  without  discrimination  in  favor  of  the  vessels  of  any 
nation. 

"Again,  Senator  Morgan  says: 

Then  this  convention,  in  Article  II,  proceeds  to  define  and 
formulate  into  an  agreement,  intended  to  be  world-wide  in  its 
operation,  'the  general  principle  of  neutralization,'  established 
in  Article  VIII  of  the  Clayton-Bulwer  treaty  on  the  basis  of  the 
treaty  of  Constantinople  of  October,  1888,  relating  to  the  Suez 
Canal. 

Nothing  is  given  to  the  United  States  in  Article  II  of  the 
convention  now  under  consideration,  nor  is  anything  denied  to 
us  that  is  not  given  or  denied  to  all  other  nations. 

"That  was  the  understanding  with  those  who  followed 
Senator  Morgan  in  his  views,  and  you  will  see  how  they 
explain  and  fit  in  with  the  views  of  those  who  opposed 
Senator  Morgan's  contention.  You  will  notice  how  the 
words  used  hy  him  in  relation  to  the  general  principle 
dovetail  with  the  words  used  in  the  treaty  itself  and  in 
the  old  Clayton-Bulwer  treaty,  'on  the  basis  of  the  treaty 
of  Constantinople  of  October,  1888,  relating  to  the  Suez 
Canal,'  and  those  tolls  were  the  same  to  every  other  nation, 
no  matter  what  the  ownership  of  the  canal  might  be. 

"I  have  already  quoted  to  you  the  words  in  the  treaty, 
that  the  high  contracting  parties  adopted  as  the  basis  of 
such  neutralization  the  following  rules,  substantially  as 
embodied  in  the  convention  between  Great  Britain  and 
certain  other  powers,  signed  at  Constantinople,  October  20, 
1888,  for  the  free  navigation  of  the  Suez  maritime  canal — 
that  is  to  say: 

The  canal  shall  be  free  and  open  in  time  of  war  as  in  time  of 


46  The  Panama  Tolls  Controversy 

peace  to  the  vessels  of  commerce  and  of  war  of  all  nations,  on 
terms  of  entire  equality,  so  that  there  shall  be  no  discrimination 
against  any  nation  or  its  citizens  or  subjects  in  respect  of  the 
conditions  or  chargers  of  trafBc  or  otherwise. 

"We  adopted  the  Suez  Canal  regulations,  which  prohib- 
ited javoritism  on  account  of  coastwise  or  other  trade. 

"There  was  inserted  in  the  Record  last  year  an  article 
written  by  Mr.  Feuille  regarding  tolls  on  the  Panama 
Canal,  in  which  he  asserts  that  the  word  'neutralization' 
used  in  the  Hay-Pauncefote  treaty  and  in  the  Clayton- 
Bulwer  treaty  had  reference  only  to  its  freedom  of  use  and 
protection  from  warlike  acts  rather  than  tolls.  And  his 
whole  argument  was  based  upon  that  false  assumption, 
because  the  'general  principle  of  neutralization'  estab- 
lished in  Article  VIII  of  the  Clayton-Bulwer  treaty  was 
not  left  to  any  false  construction,  but  the  Hay-Pauncefote 
treaty  declares  what  was  intended  by  those  words,  and  sets 
forth  seven  specific  propositions  that  are  included  in  the 
words  'general  principle  of  neutralization,'  the  very  first 
of  which  is  the  declaration  that  there  shall  be  no  discrimi- 
nation against  any  nation  or  its  citizens  or  subjects  in 
respect  of  the  conditions  or  charges  of  traffic  or  otherwise. 
We  all  know  that  the  rules  provided  for  the  operation  of  the 
Suez  Canal  do  not  exempt  the  shipping  of  any  owner  or  stock- 
holder, and  when  we  adopted  the  Suez  regulations  we  kneiv 
we  could  not  claim  an  exemption  as  owner. 

"I  have  presented  this  much  of  the  proceedings  in  the 
Senate  at  the  time  of  the  adoption  of  the  Hay-Pauncefote 
treaty  to  demonstrate  beyond  any  possible  contention  that 
the  Senate  as  a  whole,  those  who  listened  to  the  debate  or  took 
part  in  it,  did  comprehend  and  clearly  comprehend  that  the 


Meaning  of    Hay-Panncefoic  Treaiy  47 

treaty  was  being  pressed  for  adoption  upon  the  theory  of 
construction  that  it  bound  the  United  States  to  claim  no 
privileges  for  its  oivn  vessels  of  any  kind  that  it  did  not  accord 
to  other  vessels.  Thus  we  have  the  positive,  certain  declara- 
tions, as  set  forth  in  the  report,  to  establish  that  view  be- 
yond contention.  But  we  need  not  stop  there;  we  have 
the  negative  action  of  the  Senate  supporting  the  same  view, 

"I  was  present,  I  think,  during  all  of  the  debates  on 
the  treaty.  I  cannot  be  certain  that  I  was  in  the  Senate 
Chamber  every  moment,  but  I  do  not  now  recall  being 
absent.  It  was  my  first  year  in  the  Senate;  this  was  a 
great  question.  I  took  a  deep  interest  in  it  at  that  time, 
and  all  of  the  proceedings  are  impressed  upon  my  mind 
more  indelibly  than  anything  that  has  happened  since. 
And  yet  I  never  heard  during  all  of  that  debate,  either 
upon  the  original  treaty  when  it  first  came  before  us  or 
upon  the  modified  treaty  which  was  afterwards  agreed 
to  by  Great  Britain,  and  which  came  before  us  the  second 
time,  any  contention  on  the  floor  of  the  Senate  that  the 
construction  placed  upon  it  by  the  authors  of  the  treaty, 
the  committee  to  which  it  was  referred,  were  not  borne 
out  by  its  words.  With  my  strong  views  against  the  re- 
mission of  tolls  to  our  vessels,  either  coastwise  or  others, 
I  am  certain  that  I  never  should  have  voted  for  that 
treaty  had  I  supposed  that  it  would  have  at  any  time  been 
given  a  different  construction  by  the  Senate  or  the  Congress 
of  the  United  States.  I  should  have  insisted  that  it  be 
made  certain. 

"We  not  only  failed  to  make  any  such  claim,  but  by 
a  vote  of  forty-three  to  twenty-seven  we  declared  against 
the  policy  of  freeing  any  of  our  own  vessels  from  these 


48  The  Fanama   Tolls  Controversy 

tolls.  Senator  Bard,  who  represented  a  constituency  whose 
great  cities  would  be  benefited  by  a  provision  for  free  tolls 
for  our  coastwise  vessels,  introduced  an  amendment  for 
that  purpose,  as  follows : 

Strike  out  all  of  Article  III  and  substitute  the  following: 
Art.  III.    The  United  States  reserves  the  right  in  the  regu- 
lation and  management  of  the  canal  to  discriminate  in  respect 
to  the  charges  of  traffic  in  favor  of  vessels  of  its  own  citizens 
engaged  in  the  coastwise  trade. 

"When  he  proposed  that  amendment  did  he  believe 
this  agreement  gave  us  the  authority  without  that  amend- 
ment? *  *  *  Can  you  imagine  that  that  amendment 
could  come  up  without  being  debated  or  w  ithout  anything 
being  said  about  it?  Is  is  possible  that  the  Senate  did  not 
debate  that  question?  They  did  debate  it,  and  they  con- 
tended that  it  ought  not  to  be  a  part  of  the  treaty.  That 
was  the  reason  it  was  stricken  out. 

"We  were  considering  a  solemn  obligation  between 
two  of  the  greatest  countries  in  the  world — an  obligation 
between  two  countries  which  had  made  louder  procla- 
mations and  more  persistent  assertions  in  favor  of  national 
integrity  than  any  other  countries  in  the  world.  If  we 
were  honest  it  was  incumbent  upon  us  at  that  time  to 
prevent  either  of  these  countries  getting  into  a  position 
in  their  contractual  relations  with  each  other  where 
either  they  or  the  other  great  nations  of  the  world  could 
challenge  their  sense  of  national  honor.  If  there  was  a 
misunderstanding  it  was  the  duty  of  every  Senator, 
under  my  code  of  ethics,  to  have  so  declared  in  the  open 
Senate  and  to  have  attempted,  so  far  as  he  was  able  to 
do  so,  to  free  the  instrument  from  any  uncertainty. 


Meaning  of   Hay-Pauncefote  Treaty  40 

"Suppose  I  were  drafting  a  private  contract  with 
the  Senator  from  Colorado  and  there  were  within  that  con- 
tract a  certain  clause,  and  he  asked  me  what  I  understood 
that  clause  to  mean  and  I  told  him  what  I  under- 
stood it  to  mean,  and  he  said,  'That  is  just  what  I  under- 
stood it  to  mean,  and  with  that  understanding  we  will 
sign  it.'  In  what  position  would  I  be  to  come  around, 
ten  years  afterwards,  and  say,  'Though  we  agreed  as  to 
what  the  construction  should  be,  nevertheless  it  is  open, 
according  to  its  real  words,  to  some  other  construction, 
and  therefore  I  propose  to  give  it  a  different  construction'? 

"Believing  that  it  was  certain,  Senator  Bard  intro- 
duced his  amendment.  That  amendment  was  voted  down 
by  a  vote  of  forty-three  to  twenty-seven.  By  that  vote 
we  renounced  forever  a  claim  that  we  could  remit  these 
tolls. 

"I  am  well  aware  that  some  time  after  Senator  Bard 
had  left  the  Senate,  and  in  the  debates  of  about  a  year 
ago,  some  Senator  introduced  a  letter  from  ex-Senator 
Bard,  in  which  he  stated,  in  substance,  as  I  now  remember 
it,  that  he  thought  that  there  were  votes  against  his 
amendment  on  the  ground  that  we  had  the  right  to  remit 
the  tolls  without  this  amendment.  I  am  very  certain 
that  he  did  not  say  that  anyone  ever  said  so,  but  that  he 
thought  it  was  voted  down  on  that  theory. 

"/  cannot  believe  that  there  were  many  Senators  ivho 
took  that  position.  Certainly  none  in  the  open  debate, 
and  every  Senator  knew  that  it  was  contrary  to  the  general 
understanding  of  the  Senate. 

'With  the  construction  that  was  placed  upon  the  treaty 
by  those  reporting  it,  it  would  have  seemed  to  have  been  our 


50  The  Panama  Tolls  Controversy 

duty,  if  we  had  had  a  different  view,  to  have  voted  for  the 
Bard  amendment  so  as  to  make  that  question  certain.  We 
must  either  say  that  we  did  not  think  so,  or  else  we  must 
admit  that  we  were  carrying  in  our  minds  a  secret  conviction 
that  we  could  violate  that  provision  of  our  treaty,  knowing  that 
the  other  party  to  the  contract  held  a  different  view.  Such 
action  on  our  part  would,  according  to  my  view,  be  very  far 
from  proper  international  as  well  as  individual  ethics. 

"Every  man  in  the  Senate  today  recognizes  not  only 
the  clear  legal  mind  of  Senator  Bacon,  but  also  his  abso- 
lute candor  in  debate.  He  voted  for  the  Bard  amend- 
ment. He  has  left  in  no  unmistakable  terms  what  was 
understood  by  that  vote.  While  I  was  discussing  that 
question  in  the  Senate  in  1912  Senator  Bacon  asked 
permission  to  interrupt  in  support  of  my  contention. 
The  Record  discloses  the  following: 

Mr.  Bacon.  If  the  Senator  will  permit  me,  I  think 
he  could  state  it  a  little  stronger  than  he  did  when  he 
used  the  word  renounced. 

"I  have  stated  that  we  renounced  our  claim  of  a 
right  to  eliminate  our  coastwise  trade  from  the  operations 
of  the  treaty." 

Then  he  says: 
We  were  then  engaged  in  the  making  of  a  new  treaty  with 
Great  Britain,  and,  of  course,  if  Great  Britain  would  have  agreed 
to  that  arrangement  it  would  have  been  a  legitimate  contract  and 
covenant  between  the  two.  What  the  Senate  of  the  United 
States  then  did  was  to  decline  even  to  make  that  demand  upon 
Great  Britain.  We  declined  to  say  that  we  would  contend  for 
that.  We  not  only  by  that  action,  in  fact,  recognized  that  there 
was  an  obligation  of  that  kind  under  the  Clayton-Bulwer 
treaty,  but  we  declined  to  contend  that  that  should  be  surren- 
dered by  Great  Britain  and  that  a  new  contract  should  be  made, 
to  which  they  would  not  have  agreed. 


Mcanltuj  of    Hay-Pauncefotc   Treaty  51 

I  wish  to  say,  if  the  Senator  will  pardon  me  a  moment,  in 
this  connection,  as  I  am  one  of  those  recorded  as  voting  in  favor 
of  the  Bard  amendment,  that  my  idea  at  that  time  was  not  that 
any  part  of  the  merchant  marine  of  the  United  States  should 
have  free  transportation  or  free  right  of  passage  through  the 
canal,  but  I  was  standing  simply  upon  the  ground  that  I  thought 
the  United  States  should  have  the  right  to  control  whatever  tolls 
were  imposed  and  discriminate  in  favor  of  our  own  citizens  if 
we  saw  fit  to  do  so. 

"There  was  an  honest  statement  of  what  he  meant. 

I  do  not  wish  myself  to  be  considered  as  being  committed 
by  that  vote  to  the  principle  of  free  passage  for  American  ships 
in  the  canal. 

Mr.  McCUMBER.  I  think  the  vote  was  clearly  a 
declaration  of  our  intent  and  purpose  not  to  demand 
free  tolls  for  our  own  coastwise  trade.  That  is  all  that  I 
am  citing  it  for. 

Mr.  Bacon.  That  would  be  true;  and  further  than 
that,  not  to  discriminate,  that  even  if  we  charged  tolls 
we  would  charge  no  greater  tolls  for  the  ships  of  foreign 
countries  than  for  the  ships  of  our  own  country. 

"Mr.  Bacon  gave  the  full  truth  of  what  the  under- 
standing of  the  Senate  was  when  we  voted  upon  the 
Bard  amendment. 

'"And  so  both  affirmatively  in  debating  the  treaty  and 
negatively  in  voting  down  an  amendment  to  release  our 
coastwise  vessels  from  the  payment  of  tolls  have  we  declared 
our  purpose  to  maintain  the  policy  of  nondiscrimination 
which  has  been  the  continuous  policy  of  this  country  for 
nearly  a  hundred  years. 

"Remember  that  the  South  American  nations  have 
rights  here  as  well  as  Great  Britain  and  the  United  States. 


5'2  The  Pmiama   Tolls  Controversij 

They  must  necessarily  have  more  or  less  of  a  coastwise 
trade. 

"In  agreeing  to  the  Haj'-Pauncefote  treaty  it  was  the 
purpose  of  the  United  States  to  place  itself  exactly  in  the 
same  position  it  would  have  been  in  had  the  canal  been 
constructed  by  France,  by  Nicaragua,  or  any  other 
Central  American  state.  We  claimed  no  special  privileges, 
because  the  money  represented  our  investment.  It  was  be- 
lieved that  the  tolls  charged  and  the  benefits  derived  specially 
by  the  United  States  icould  compensate  21s  for  the  investment. 

"Senator  Davis,  in  his  report  on  the  Hay-Pauncefote 
treaty,  declared  this  its  purposes  in  concise  language, 
and  asserted  boldly  that  the  United  States  was  to  obtain 
no  other  privileges  than  those  granted  to  the  nations  of 
the  world. 

"Back  of  the  claim  of  right  to  free  our  own  ships 
from  the  payment  of  tolls  and  the  real  basis  of  the  claim 
is  that  we  paid  for  the  canal  with  our  own  money,  that 
we  own  it  and  ownership  should  carry  with  it  the  right 
to  do  as  we  please.  Yes,  we  do  own  it.  But  we  bought 
the  right  to  construct  that  canal  on  foreign  territory, 
and  the  purchase  price  for  the  right  to  build  and  operate 
that  canal  was  that  we  should  forever  maintain  its  neu- 
trality and  guarantee  equality  of  treatment  to  the  vessels 
of  all  nations.  Can  we  now  honorably  claim  the  right 
and  repudiate  the  consideration.' 

"The  importance  and  validity  of  this  consideration 
and  our  moral  duty  to  fulfill  its  obligations  will  be  made 
more  apparent  as  we  view  the  conditions  which  preceded 
it.  Prior  to  the  Clayton-Bulwer  treaty  of  1850,  two 
great  powers  were  the  sovereigns  of  all  the  territory  of 


Meaning  of    Hay-Pauncefote   Treafij  Hii 

North  America,  except  Alaska,  north  of  the  Mexican  bor- 
der. The  proportionate  importance  of  Canada  and  the 
United  States  was  less  striking  than  it  is  today.  The 
Atlantic  and  Pacific  coast  line  of  Canada  was  even  greater 
than  that  of  the  United  States.  In  addition  to  this  great 
British  possession  north  of  us,  that  country  had  her 
Caribbean  possessions,  the  Bermudas,  the  Bahamas, 
British  Guiana,  British  Honduras,  and  other  islands. 
She  also  exercised  a  protectorate  over  a  vast  stretch  of 
country  on  the  eastern  shore  of  Central  America  known 
as  the  Mosquito  Coast.  She  was  then  in  possession  of 
the  entrance  to  what  was  then  regarded  as  the  only  feas- 
ible canal  route  across  the  Isthmus.  Both  the  United 
States  and  Great  Britain  were  interested  in  a  communi- 
cation between  the  two  oceans  for  the  benefit  of  their 
respective  coast  lines.  The  United  States  beheld  Great 
Britain  in  possession  of  that  territory  which  seemed  to 
be  the  key  to  an  isthmian  canal.  We  feared,  and  justly 
feared,  the  control  of  such  a  connecting  waterway  by  any 
foreign  Government;  and,  therefore,  the  United  States, 
not  Great  Britain,  asked  audience  to  the  end,  not  that 
we  should  obtain  an  advantage  over  British  rights  in  any 
canal  that  might  connect  the  two  oceans,  but  that  Great 
Britain  should  not  hold  an  advantage  over  us.  That 
diplomatic  audience  was  granted  at  the  solicitation  of  our  ^ 
Government,  and  we  secured  just  what  we  asked  for  and 
conceded  to  the  other  party  all  the  rights  which  we  asked 
for  ourselves.  That  general  idea  of  neutral  rights,  equality 
of  rights,  has  been  maintained  by  both  nations,  down  until 
after  the  adoption  of  the  Hay-Pauncefote  treaty."  *  *  * 
"The  two  countries  which  joined  in  the  Hay-Paunce- 


54  The  Panama   Tolls  Controversy 

fote  convention  had  for  so  many  years  declared  their  respec- 
tive policies  toward  the  freedom  and  impartial  use  of  any 
ship  canal,  had  so  made  thai  policy  a  part  of  their  political 
history,  that  it  was  thought  by  both  nations  that  the  mere 
reiteration  of  that  policy  was  sufficient  to  insure  its  continu- 
ance without  going  into  the  details  of  all  cases  which  it 
might  cover  and  which  it  might  not.  It  teas  the  spirit  of  the 
policy  that  was  to  govern.  The  rules  of  the  Suez  Canal 
were  knoum  by  both  nations,  and  when  they  declared  that 
the  rules  governing  the  Suez  Canal  should  govern  the  Panama 
Canal,  both  felt  that  they  had  sufficiently  particularized.'''' 

Did  the  vote  on  the  Bard  amendment  reflect  the  judg- 
ment of  the  then  United  States  Senate?  We  have  already 
given  the  convincing  argument  of  Senator  McCumber 
that  it  did.  Searching  examination  of  the  Congressional 
Record  sustains  the  Senator's  contention.  Representative 
Stevens  ably  sustains  the  Senator  in  the  following: 

"When  the  first  Hay-Pauncefote  treaty  was  before 
the  Senate  for  ratification  on  December  13,  1900,  the  fol- 
lowing proceedings  appear  on  page  15,  Senate  Document 
No.  85,  Fifty-seventh  Congress,  first  session :  'On  the  ques- 
tion to  agree  to  the  amendment  proposed  by  Mr.  Bard, 
to  wit :  Strike  out  Article  III  and  substitute  the  following : 
Article  III.  The  United  States  reserves  the  right  in  the 
regulation  and  management  of  the  canal  to  discriminate 
in  respect  of  the  charges  of  traffic  in  favor  of  vessels  of  its 
own  citizens  engaged  in  the  coastwise  trade.'  It  was 
determined  in  the  negative:  Yeas,  27;  nays,  43. 

"This  would  also  seem  to  show  conclusively  that  no 
such  a  provision  was  intended  to  be  in  the  treaty  or  could 


Meaning  of    Hay-Pauucefutc   Treaty  55 

in  any  way  be  implied  or  inferred  from  its  terms,  or  such  an 
amendment  would  not  be  offered.  The  fact  that  it  was 
rejected  shows  the  Senate  understood  such  fact,  did  not 
want  such  provision,  but  desired  to  preserve  and  maintain 
the  general  principle  of  'equality  and  neutrality,'  so  clearly 
set  forth  in  the  report  of  Senator  Davis  and  the  memoran- 
dum of  Secretary  Hay  accompanying  the  submission  of 
the  treaty,  and  in  this  way  preserve  the  uniform  and 
continuous  policy  as  to  the  canal  for  more  than  fifty  years. 
This  action  of  the  Senate  was  so  overwhelming  that  no 
attempt  w^as  made  by  anyone  to  offer  such  an  amendment 
to  the  second  treaty. 

"To  explain  and  offset  this  conclusive  evidence  that 
no  discrimination  was  intended  by  the  Senate  or  could  be 
had  for  the  coastwise  trade,  the  minority,  on  page  4  of 
the  minority  report,  inserted  a  sentence  from  a  private 
letter  of  Senator  Bard  which  states: 

When  my  amendment  was  under  consideration  it  was  gen- 
erally conceded  by  Senators  that  even  without  that  specific 
provision  the  rules  of  the  treaty  would  not  prevent  our  Govern- 
ment from  treating  the  canal  as  part  of  oiu-  coast  line  and 
consequently  could  not  be  construed  as  a  restriction  of  our  inter- 
state commerce,  forbidding  the  discrimination  in  charges  for  tolls 
in  favor  of  om*  coastwise  trade,  and  this  conviction  contributed 
to  the  defeat  of  the  amendment. 

"To  show  how  much  Senator  Bard  actually  knew 
about  that  subject  in  comparison  with  the  other  Senators 
who  had  a  great  interest  and  knowledge  of  it,  it  is  only 
necessary  to  examine  his  legislative  proposition  as  it  ap- 
pears from  the  records  of  the  Senate.  Senate  Document 
No.  85,  Fifty-seventh  Congress,  first  session,  page  15, 
shows  the  following: 


56  The  Panama  Tolls  Controversy 

On  the  question  to  agree  to  the  amendment  proposed  by  Mr. 
Bard,  to  wit,  Strike  out  Article  III  and  substitute  the  following: 
Article  III.  The  United  States  reserves  the  right  in  the  regula- 
tion and  management  of  the  canal  to  discriminate  in  respect  of 
the  charges  of  traffic  in  favor  of  vessels  of  its  own  citizens 
engaged  in  coastwise  trade. 

"The  text  of  the  treaty  shows  Article  III  of  the 
original  treaty  to  read  as  follows: 

The  contracting  parties  will  immediately  upon  the  exchange 
of  the  ratifications  of  this  convention  bring  it  to  the  notice  of 
the  other  powers  and  invite  them  to  adhere  to  it. 

"So  that  the  amendment  was  not  germane  as  offered, 
was  not  in  the  right  place,  was  not  proposed  to  the  right 
article  or  section,  and,  finally.  Article  III  had  already 
been  stricken  out  of  the  treaty  on  a  motion  by  Senator 
Foraker.  Senate  Document  No.  85,  page  13,  above  re- 
ferred to.  Yet  this  evident  misinformation,  carelessness 
and  lack  of  knowledge  as  to  what  was  actually  going  on  is 
offered  as  a  basis  for  reversing  the  policy  and  history  of 
our  Nation  and  violating  its  solemn  pledges  to  the  world. 
The  other  Senators  who  now  so  vigorously  recollect  are 
shown  to  have  previously  voted  that  the  United  States 
was  to  be  included  within  the  term  'all  nations'  without 
any  qualification  or  exception.  Their  records  and  their 
memories  do  not  seem  to  agree." 

Former  Senator  Fairbanks  declares  emphatically 
that: 

"The  Bard  amendment  was  voted  down,  after  full 
discussion,  not  because  it  was  regarded  as  surplusage,  but 
because  in  the  opinion  of  a  large  majority  of  the  Senate 
it  was  violative  of  the  spirit  of  equality,  which  had  been 
expressed  in  the  treaty." 


Meaning  of   Hay-Pauncefote   Treaty  57 

The  following  colloquy  from  the  hearings  before  the 
Committee  on  Interoceanic  Canals,  United  States  Senate, 
shows  what  the  then  United  States  Senate  considered  to 
be  the  matter  of  controlling  importance  and  upon  what 
its  attention  was  focused : 

"SENATOR  Page.  I  would  like  to  know,  if  I  can, 
just  what  the  Senator  thinks  about  this  question  of 
free  tolls  for  the  United  States  coastwise  vessels  at  the 
time  the  second  Hay-Pauncefote  treaty  was  being  con- 
sidered. Speaking  from  your  own  knowledge,  as  one 
of  the  Committee  on  Foreign  Relations,  as  well  as  a 
member  of  the  Senate,  at  the  time  of  the  passage  of  the 
act,  can  you  say  without  qualification  that  in  your  judg- 
ment the  Hay-Pauncefote  treaty  would  not  have  been 
ratified  by  the  Senate  if  it  had  believed  that  the  United 
States  could  not  under  that  treaty  exempt  its  coastwise 
vessels  from  tolls? 

"Mr.  FORAKER,  No;  I  cannot  say  that  without 
qualification.  I  can  say  this,  that  it  is  my  impression, 
however,  and  it  was  certainly  my  understanding,  that  we 
were  making  a  treaty  under  which  we  could  do  any- 
thing we  saw  fit  to  do  with  respect  to  our  own  vessels. 
We  could  exempt  them  from  tolls,  if  we  wanted  to;  but 
that  was  not  seriously  considered  at  that  time  because  it 
was  to  be  an  enterprise  that  would  cost  a  great  deal  of 
money,  and  I  think  now  that,  in  so  far  as  I  can  recall, 
the  state  of  my  mind  on  that  subject — in  so  far  as  I  had 
any  mind  on  the  subject — was  that  it  would  be  a  long  time 
before  we  would  reach  a  place  where  we  would  want  to 
exempt  anybody  from  the  payment  of  toll  who  wanted 
to  use  the  canal.    But  the  right  of  the  United  States  to 


58  The  Panama   Tolls  Controversy 

pass  through  any  ships  she  saw  fit  was  unquestionably 
the  prevaiUng  thought  in  the  Senate,  according  to  my 
understanding.  We  would  not  think  of  charging  our  bat- 
tleships anything  or  our  own  revenue  cutters  anything 
for  passing  through  the  canal  which  we  had  built  with  so 
much  money,  and  in  no  instance  would  we  think  of  doing 
with  our  own  ships  anything  except  what  our  own  best 
interests  might  justify  us  in  doing.  All  other  nations 
were  to  be  on  terms  of  absolute  equality  with  respect 
to  the  use  of  the  canal.  That  was  the  prevailing  thought 
I  had  and  we  did  not  want  any  infringing,  because  we  were 
building  it  primarily  as  a  war  necessity — a  measure  of 

defense,  and  not  for  the  purpose  of  commerce. 

*         *         * 

"SENATOR  BRANDEGEE.  It  has  been  stated  here  by 
several  witnesses  that  one  of  the  principal  objects  in  the 
construction  of  the  canal  was  to  lower  the  rates  of  the 
transcontinental  railroads.  What  do  you  say  about 
that? 

"Mr.  FORAKER.  I  think  the  first  great  purpose  of 
the  canal  was  national  defense;  to  transfer  our  navy  back 
and  forth  from  one  side  to  the  other  as  necessity  might 
require.  Our  navy  was  not  very  large;  that  is,  not 
large  in  proportion  to  our  country.  It  is  now  much 
larger.  Our  country  has  two  ocean  fronts,  and  you  had 
to  go  around  Cape  Horn  to  pass  from  one  to  the  other. 
The  fact  of  the  Oregon  having  to  go  around  the  Horn 
during  the  Spanish-American  War  was  the  precipitating 
cause  of  the  action  we  took. 

"SENATOR  BRANDEGEE.    I  agree  with  you. 

"Mr.    FORAKER.      And    national    defense    ivas    the 


Meaning  of    Hay-Pauncefutc   Treaty 


.><) 


primary  purpose  with  the  majority  of  Senators.  I  cannot 
say  that  it  was  the  sole  purpose." 

"That  was  not  seriously  considered  at  that  time" 
(see  page  57)  is  important.  But  that  that  was  seriously 
considered  at  that  time  by  Great  Britain  is  equally 
important.  "National  defense  was  the  primary  purpose 
with  the  majority  of  Senators" — see  above.  Equal  and 
just  tolls  for  all  units  of  traffic  using  the  canal  was  the 
primary  purpose  with  Great  Britain.  Presumably  each 
insisted  on  getting  what  it  wanted  most  and  the  Hay- 
Pauncefote  treaty  construed  in  the  light  of  history  shows 
that  each  did  get  what  it  wanted  most. 

We  can  state  this  point  in  greater  detail  as  follows: 
The  United  States  needed  the  Panama  Canal  as  a  military 
and  naval  asset,  and  therefore  sought  the  modification  of 
the  Clayton- Bidiver  treaty  with  that  end  in  view.  Great 
Britain  desired  the  construction  of  the  canal  because  of  its 
large  commercial  interests.  The  one  sought  ownership 
and  control  as  a  military  necessity;  the  other  sought  condi- 
tions and  charges  of  traffic  that  would  he  just  and  equitable 
— that  woidd  be  equal  for  identical  units  of  traffic  using 
the  canal.  The  paramount  object  desired  by  the  two  con- 
tracting parties  was  different.  Final  agreememt  ivas  secured 
by  writing  into  the  Hay-Pauncefote  treaty  the  controlling 
object  of  each  of  the  tivo  contracting  parties.  The  United 
States  secured  thereby  its  desired  military  and  naval  asset. 
Great  Britain  secured  thereby  the  assurance  of  equality 
in  tolls  between  our  nationals  and  its  own  subjects. 

Representative  Stevens  throws  light  on  the  con- 
struction of  treaties  in  the  following: 


60  The  Panama   Tolls  Controversy 

"One  of  the  most  important  considerations  in  the 
construction  of  Section  1,  Article  III  as  to  'equality  of 
treatment  without  discrimination,'  and  as  to  whether 
an  exception  concerning  our  coastwise  vessels  can  be  im- 
plied from  it,  must  be  from  the  language  of  the  preamble 
of  the  treaty.    This  preamble  is  in  terms : 

The  United  States  of  America  and  His  Majesty  Edward  the 
Seventh,  of  the  United  Kingdom  of  Great  Britain  and  Ireland, 
etc.,  being  desirous  to  facilitate  the  construction  of  a  ship  canal 
to  connect  the  Atlantic  and  Pacific  Oceans  by  whatever  route 
may  be  considered  expedient,  and  to  that  end  to  remove  any 
objection  which  may  arise  out  of  the  convention  of  the  nine- 
teenth of  April,  1850,  commonly  called  the  Clayton-Bulwer 
treaty,  to  the  construction  of  such  canal  under  the  auspices  of 
the  Government  of  the  United  States,  without  impairing  the 
"general  prijiciple"  of  neutralization  established  in  Article  VIII 
of  that  convention.     *     *     * 

"It  is  a  fundamental  principle  of  construction  of  all 
documents  that  such  a  preamble  shows  first  of  all  the 
reason  for  the  making  and  existence  of  the  agreement, 
document,  or  act;  and  secondly,  that  the  language  of 
the  document,  treaty,  and  so  forth,  should  be  so  con- 
strued, if  reasonably  possible,  to  give  efiFect  to  such 
purpose.     (Moore,  5  Dig.  Int.  Law,  p.  249.) 

"Thus  it  is  important  to  ascertain  what  is  the  'gen- 
eral principle'  of  neutralization  established  in  Article 
VIII  of  the  Clayton-Bulwer  treaty,  which  must  not  be 
impaired  by  this  treaty.  This  Article  VIII  has  been 
previously  set  forth  in  terms,  so  need  not  here  be  repeated. 

"It  will  be  noted  that  the  general  principle  is  estab- 
lished and  embraces,  first,  protection  to  the  canal;  second, 
that  the  charges  therein  shall  be  just  and  equitable;  and 
third,  that  it  shall  be  open  to  the  citizens  and  subjects  of  the 


Meaning  of    Hay-Pannccfote   Treaty  01 

United  States  and  Great  Britain  un  equal  terms,  and  also 
shall  be  open  on  like  terms  to  the  citizens  and  subjects  of  other 
nations  willing  to  grant  the  same  protection  to  the  canal 
as  do  Great  Britain  and  the  United  States.  Subsequently, 
by  agreement  in  the  second  treaty,  the  protection  of  the  canal 
was  confided  and  confined  to  the  United  States,  without 
changing  the  other  provisions  of  the  'general  principle.' 

*  *         * 

*'Secretary  of  State  Olney,  in  1896,  in  a  memorandum 
on  the  Clayton-Bulwer  treaty,  said  (Moore,  3  Dig.  Int. 
Law,  p.  207): 

As  Article  VIII  expressly  declares,  the  contracting  parties 
by  the  convention  desired  not  only  to  accomplish  a  particular 
object,  but  to  estabUsh  a  general  principle.  This  general  prin- 
ciple is  manifested  by  the  provisions  of  the  first  seven  articles, 
and  is  that  the  interoceanic  routes  there  specified  should,  under 
the  sovereignty  of  the  States  traversed  by  them,  be  neutral  and 
free  to  all  nations  aUke. 

"The  preceding  articles  of  the  treaty,  which  show 
the  intent  and  purpose  of  the  general  principle,  have 
already  been  described,  and  all  together  conclusively 
show  that  the  term  'general  principles'  can  bear  no  other 
construction  with  reference  to  the  Hay-Pauncefote 
treaty  than  requiring  'equality  of  treatment  of  all  vessels, 
foreign  and  domestic,  coastwise  and  all,'  and  that  there 
must  be  no  discrimination  as  to  charges  or  conditions  of 
traffic  of  any  nation,  and  that  all  charges  and  conditions 
should  be  just  and  equitable,  must  be  an  integral  condition 
for  neutralization  of  the  canal. 

*  *         * 

"These  are  the  same  conditions  set  forth  in  Article 
III  of  the  Hay-Pauncefote  treaty,  and  on  their  face  there 


62  The  Panama   Tolls  Controversy 

can  be  no  possible  exception  of  our  commerce.    Not  only 
the  language  of  the  section  but  the  very  reason  for  the 

existence  of  the  language  forbids  such  exception. 

*        *        * 

"This  has  been  the  invariable  construction  of  the 
treaties  and  of  the  policy  of  the  United  States  from  the 
beginning  down  to  the  present.  There  should  further  be 
noted  the  action  of  our  Government  in  carrying  out  the 
'general  principle,''  thus  construed  and  defined  in  these 
treaties.  President  Roosevelt  in  his  message  of  December 
4,  1901,  transmitting  to  the  Senate  the  Hay-Pauncefote 
treaty,  which  was  ratified  and  is  now  in  effect,  described 
it  as  a  convention  without  impairing  the  general  principle 
of  neutralization  established  in  Article  VIII  of  the  Clay- 
ton-Bulwer  treaty.  Further,  on  the  twenty-second  day  of 
February,  1902,  in  the  proclamation  making  such  treaty 
effective.  President  Roosevelt,  in  the  preamble  to  it,  again 
sets  forth  the  existence  of  the  'general  principle''  of  neutrali- 
zation which  was  to  be  maintained  by  such  treaty,  and  in 
the  final  statement  of  the  proclamation  is  found  this 
clause,  *to  the  end  that  the  same  and  every  article  and 
clause  thereof  may  be  observed  and  fulfilled  with  good 
faith  by  the  United  States  and  the  citizens  therof.' 

"Thus  the  United  States  Government  at  once  in 
the  proper  way  notified  the  world  in  the  exact  language 
of  the  treaty  itself  of  its  intention  to  observe  and  fulfill 
every  article  and  clause  thereof  in  the  exact  terms  of  the 
treaty  itself. 

SUEZ  CANAL  RULES 

"It  is  an  elementary  rule  in  the  construction  of  treaties 
and  statutes  that  where  the  provision  in  question  has  been 


Meaning  of    Hay-Pavncefoie   Treaty  OS 

copied  from  those  of  another  nation  or  state,  where  such 
provision  has  received  a  careful  construction,  that  such 
construction  would  be  of  great  value  in  considering  the 
proper  construction  of  the  borrowed  section.  In  this 
instance  Article  III  of  the  treaty  provides  'that  the  United 
States  adopts  as  a  basis  of  the  neutralization  of  such  ship 
canal  the  following  rules,  substantially  as  embodied  in 
the  convention  of  Constantinople,  signed  October  28, 
1888,  for  the  free  navigation  of  the  Suez  Canal.  That  is  to 
say,'  then  follow  the  six  sections  laying  down  the  rules 
of  neutrahzation  and  equality  whch  shall  apply  to  the 
Panama  Canal. 

"The  article  in  the  Suez  convention  relating  to  charges 
and  tolls  is  as  follows: 

Article  X.  The  high  contracting  parties,  by  application  of 
the  principle  of  equality  as  regards  the  free  use  of  the  canal  (a 
principle  which  forms  one  of  the  bases  of  the  present  treaty), 
agree  that  none  of  them  shall  endeavor  to  obtain,  with  respect  to 
the  canal,  territorial  or  commercial  advantage  or  privileges  in  any 
international  arrangements  which  may  be  concluded.     *     *     * 

"Other  sections  contain  substantially  the  same 
provisions  as  in  the  other  sections  of  Article  III  of  the 
Hay-Pauncefote  treaty. 

"These  sections  have  always  been  construed  to  forbid 
any  discrimination  in  favor  of  or  against  the  coastwise 
vessels  or  other  trade  of  any  of  the  contracting  nations; 
and  though  Great  Britain  really  has  the  controlling  voice 
in  the  management  of  the  canal,  and  France  is  the  head- 
quarters of  the  management,  yet  their  vessels  pay  and  are 
treated  exactly  the  same  as  all  others.     *     *     *  " 

This  shows  that  the  United  States  as  owner  of  the 
Panama  Canal  is  not  entitled  to  grant  free  transportation 


64  The  Panama   Tolls  Controversy 

through  it  to  its  coastwise  shipping  as  a  result  of  such 
ownership. 

The  following  from  Senator  Burton's  speech  clinches 
the  argument  against  the  right  of  the  United  States  to 
exempt  the  shipping  of  any  of  its  nationals  from  the  pay- 
ment of  the  same  tolls  imposed  on  non-nationals : 

"President  Roosevelt,  in  submitting  the  second 
Hay-Pauncefote  treaty,  said: 

It  specially  provides  that  the  United  States  alone  shall  do 
the  work  of  building  and  assume  the  responsibility  of  safeguard- 
ing the  canal  and  shall  regulate  its  neutral  use  by  all  nations  on 
terms  of  equality  without  the  guaranty  of  interference  of  any 
outside  nation  from  any  quarter. 

"Again,  he  says,  on  January  4,  1904,  in  a  special 


Under  the  Hay-Pauncefote  treaty  it  was  explicitly  pro- 
vided that  the  United  States  should  control,  police  and  protect 
the  canal  which  was  to  be  built,  keeping  it  open  for  the  vessels  of 
all  nations  on  equal  terms.  The  United  States  thus  assumes  the 
position  of  guarantor  of  the  canal  and  of  its  peaceful  use  by  aU 
the  world. 

"In  a  note  by  Secretary  Hay  on  the  following  day,  h-^ 

states : 

The  Clayion-Bulwer  treaty  was  conceived  to  form  an 
obstacle,  and  the  British  Government  therefore  agreed  to  abro- 
gate it,  the  United  States  only  promising  in  return  to  protect 
the  canal  and  keep  it  open  on  equal  terms  to  all  nations,  iii 
accordance  with  our  traditional  policy. 

"Aside  from  correspondence  and  declarations  relating 
to  the  proposed  Isthmian  canal,  two  negotiations  remain 
very  nearly  contemporaneous  with  the  date  of  the  Hay- 
Pauncefote  treaty,  both  of  which  are  in  entire  accordance 


Meaning  of   Hay-Pavncefote  Treaty  65 

with  our  settled  national  policy,  but  which  in  their  bearing 
upon  the  interpretation  of  the  Ilay-Pauncefote  treaty  far 
outweigh  all  the  preceding,  not  only  because  of  the  simi- 
larity in  the  questions  involved  but  because  of  the  further 
fact  that  they  are  so  nearly  contemporaneous  with  the 
negotiation  of  the  treaty.  The  facts  pertaining  to  them 
must  have  been  clearly  in  mind  when  the  treaty  was  framed 
They  are: 

"Our  negotiations  in  relation  to  the  so-called  open 
door  in  China  in  1899  and  succeeding  years.  [The  other — 
the  Welland  Canal  controversy — anon.]  Great  Britain, 
Germany,  France,  Russia  and  Japan  were  the  countries 
regarded  as  possessing,  though  in  unequal  degrees,  an 
advantageous  position  in  China. 

*         *         * 

"Mr.  Hay  accordingly  laid  down  certain  principles 
which  he  desired  should  be  formally  declared  by  the  Rus- 
sian Empire  and  by  all  the  great  powers  interested  in 
China.  Of  these  principles  he  said,  they  'will  be  eminently 
beneficial  to  the  commercial  interests  of  the  whole  world' : 


Third,  that  it  will  levy  no  higher  harbor  dues  on  vessels  of 
another  nationality  frequenting  any  port  in  such  "sphere"  than 
shall  be  levied  on  vessels  of  its  own  nationality,  and  no  higher 
railroad  charges  over  lines  built,  controlled  or  operated  within 
its  "sphere"  on  merchandise  belonging  to  citizens  or  subjects  of 
other  nationalities  transported  through  such  "sphere"  than 
shall  be  levied  on  similar  merchandise  belonging  to  its  own  na- 
tionals transported  over  equal  distances. 

"Special  attention  is  called  to  the  third  of  the  prin- 
ciples, the  recognition  of  which  was  requested.  It  included 
a  demand  that  no  higher  railroad  charges  over  lines  built y 


66  The  Panama   Tolls  Controversy 

controlled  or  operated  within  its  sphere  on  merchandise 
belonging  to  the  citizens  or  subjects  of  other  nationalities 
should  be  levied  than  on  similar  merchandise  belonging  to 

its  own  nationals. 

*         *         * 

^"We  thus  demanded  equal  use  of  the  ports  controlled 
by  these  various  nations,  equal  privileges  in  trade,  and, 
what  is  most  significant  of  all,  equal  railroad  rates  upon 
railways  constructed  by  Russia  at  great  expense  and  extend- 
ing into  the  interior  through  Chinese  territory  to  a  connection 
with  railways  within  her  own  domains.     *     *     * 

"Not  only  was  the  treaty  in  accordance  with  our 
traditional  policy,  but  negotiations  had  been  initiated 
contemporaneously  with  the  negotiations  with  the  various 
nations  in  China  for  an  'open  door,'  and  it  would  have  been 
the  height  of  inconsistency  to  have  made  the  demand  for 
equality  of  treatment  in  China  and  to  have  denied  it  in  a 
treaty  relating  to  an  Isthmian  canal. 

"Our  record  was  so  uniform  and  unbroken  that  we 
could  have  taken  no  other  ground.  The  attempt  by  John 
Adams  and  Franklin  and  Jay  in  the  years  1782  and  1783 
pointed  a  new  way  as  emphatically  and  as  decisively  as 
any  of  the  great  principles  which  lie  at  the  foundation  of 
our  Government." 

Negotiations  were  begun  with  the  clear  under- 
standing on  the  part  of  both  Great  Britain  and  the  United 
States  that  the  ships  of  all  nations  would  be  allowed  the 
use  of  the  canal  on  equal  terms. 

Henry  White  states  the  results  of  the  first  conference 
in  the  following: 


Meanirig  of    Haij-Pciuncefote  Treaty  07 

"A  brief ,  informal  conversation  followed,  during  which 
Lord  Salisbury  said  nothing  to  leave  me  to  suppose  that 
he  is  unfavorably  disposed — much  less  hostile — to  the 
construction  of  the  canal  under  our  auspices,  provided 
that  it  is  open  to  the  ships  of  all  countries  on  equal  terms." 

''Open  to  the  ships  of  all  countries  on  equal  terms" 
was  understood  to  mean: 

"It  is  always  understood  by  the  United  States  and 
Great  Britain  that  the  parties  constructing  or  owning 
the  same  shall  impose  no  other  charges  or  conditions  of 
traffic  thereupon  than  are  just  and  equitable;  and  that 
the  same  canals  or  railways,  being  open  to  the  citizens 
and  subjects  of  the  United  States  and  Great  Britain 
on  equal  terms,  shall  also  be  open  on  like  terms  to  the 
citizens  and  subjects  of  every  other  State." 

Negotiations  were  closed  with  this  understanding 
according  to  Ambassador  Choate: 

"I  wrote  to  the  chairman  of  the  committee,  Senator 
O'Gorman,  inclosing  to  him,  by  the  express  permission 
of  the  Secretary  of  State,  a  copy  of  my  letters  to  Secre- 
tary Hay  between  August  3  and  October  12,  1901,  the 
same  that  you  have.  To  my  mind  they  establish  beyond 
question  the  intent  of  the  parties  engaged  in  the  negotiation 
that  the  treaty  should  mean  exactly  what  it  says,  and  excludes 
the  possibility  of  any  exemption  of  any  kind  of  vessels  of 
the  United  States.  Equality  between  Great  Britain  and 
the  United  States  is  the  constant  theme,  and  especially 
in  my  last  letter  of  October  2,  1901,  where  I  speak  of 
Lord  Lansdowne's  part  in  the  matter,  and  say  'He  has 
shown  an  earnest  desire  to  bring  to  an  amicable  settle- 
ment,  honorable   alike   to   both   parties,   this   long   and 


68  The  Panama   Tolls  Cuniroversy 

important  controversy  between  the  two  nations.  In 
substance,  he  abrogates  the  Clayton-Bulwer  treaty, 
gives  us  an  American  canal,  ours  to  build  as  and  where 
we  like,  to  own,  control,  and  govern,  on  the  sole  condition 
of  its  being  always  neutral  and  free  for  the  passage  of  the 
ships  of  all  nations  on  equal  terms,  except  that  if  we  get 
into  a  war  with  any  nation,  we  can  shut  its  ships  out  and 
take  care  of  ourselves.' 

"This  was  the  summing  up  of  our  whole  two  months' 
negotiation." 

Closed  with  the  understanding  embodied  in  the 
following,  according  to  Secretary  of  State  John  Hay — 
the  man  toho  knew: 

"All  means  all.  The  treaty  was  not  so  long  that  we 
could  not  have  made  room  for  the  word  'other'  if  we  had 
understood  that  it  belonged  there.  'All  nations'  means 
all  nations,  and  the  United  States  is  certainly  a  nation." 

"That  was  the  understanding  between  yourself  and 
Lord  Pauncefote  when  you  and  he  made  the  treaty?" 
I  pursued. 

"It  certainly  was,"  he  replied.  "It  was  the  under- 
standing of  both  Governments,  and  I  have  no  doubt 
that  the  Senate  realized  that  in  ratifying  the  second 
treaty  without  such  an  amendment  it  was  committing 
us  to  the  principle  of  giving  all  friendly  nations  equal 
privileges  in  the  canal  with  ourselves.  That  is  our  golden 
rule." 

Senator  INIcC umber  properly  says: 

"I  cannot  imagine  how  any  Senator  in  this  chamber 
who  will  read  the  history  that  precedes  the  Clayton- 
Bulwer  treaty,  who  will  read  the  Clayton-Bulwer  treaty 


Meaning  of    Ilay-Pauncefotc   Treat;/  (50 

follo\\ang  our  declarations,  and  who  will  then  read  the 
declarations  of  this  Government  in  all  its  statements 
from  that  time  down  to  1901,  can  for  one  moment  ques- 
tion our  great  national  policy  of  equality  of  treatment 
of  all  vessels  which  might  use  that  canal.  Then,  when 
we  come  down  to  the  conditions,  the  views  of  both  Gov- 
ernments at  the  time  we  entered  into  the  great  obligation 
known  as  the  Hay-Pauncefote  treaty,  when  we  stop  and 
read  the  declaration  of  the  British  press  and  the  declara- 
tion of  the  American  press  that  coincide  exactly,  showing 
that  the  views  of  the  two  nations  have  never  changed  in 
the  slightest  degree,  when  we  follow  that  up  with  the 
declaration  of  our  negotiators  *  *  *  jn  which  they 
declare  over  and  over  again  that  the  general  principles 
of  neutrality  enunciated  in  the  Clayton-Bulwer  treaty 
should  not  be  violated  or  impaired  by  this  Government, 
and  when  we  follow  that  up  by  the  declarations  that 
are  shown  in  the  letters  [of  Ambassador  Choate  and 
Henry  White]  *  *  *  j  cannot  conceive  the  possi- 
bility of  any  man's  mind  being  so  everlastingly  preju- 
diced that  he  will  close  it  to  all  this  clear,  unmistakable 
evidence  of  what  they  and  we  all  understood  this  treaty 
to  mean,  and  insist  that  notwithstanding  all  this  we 
can  read  the  treaty  another  way.  Our  duty  is  to  read 
that  treaty  the  way  the  parties  understood  it  to  mean 
when  they  signed  it." 

The  matter,  as  indicated  in  the  foregoing  by  Senator 
McCumber,  was  so  fully  settled  by  those  who  actually 
negotiated  the  Hay-Pauncefote  treaty  and  the  treaty 
with  Panama — Hay-Bunau-Varilla — and  knew  the  intent 
of   the   parties   that   the   great   English    and   American 


70  The  Panama  Tolls  Controversy 

common  law  doctrine  of  stare  decisis  as  to  the  rights 
of  the  parties  should  apply  if  the  doctrine  could  be  en- 
forced in  view  of  the  original  partnerships  and  vested 
rights.  We  are  plainly  obligated  to  operate  the  Panama 
Canal  "Jor  the  benefit  of  mankind  on  equal  terms  to  all." 


Chapter  II 

Legal  and  Moral  Aspects  of  Tolls  "Exemption 

Citizens  of  the  United  States  should,  as  we  see  it' 
brush  aside  all  personal,  political  and  local  considerations 
and  approach  the  problem  on  a  high  moral  plane  and  in  a 
judicial  frame  of  mind.  We  should  turn  a  deaf  ear  to  all 
race  or  religious  appeals,  and  turn  an  equally  deaf  ear  to 
the  blair  of  party  trumpets,  however  loud  and  thrilling, 
just  as  a  judge  should  when  he  puts  on  his  judicial  robes 
and  ascends  the  bench  to  decide  a  case  of  law  on  contracts, 
regardless  of  his  personal  preference,  feelings  or  other 
considerations  not  a  part  of  the  record. 

Careful  examination  of  the  record  of  the  issue  which 
has  been  made  up;  an  issue  which  was  begun,  as  far  as 
the  governing  principles  are  concerned,  as  far  back  as  1826, 
which  record  is  on  file  in  the  archives  of  all  civilized  Gov- 
ernments and  of  all  large  libraries  of  the  world,  con- 
strained us  to  urge  the  repeal  of  this  ill-considered  act  of 
Congress. 

Before  we,  in  that  manner,  go  down  not  merely  in 
American  history,  but  in  the  history  of  the  world,  let  us 
pause,  examine  the  record  again  and  reason  together  with- 
out race  or  party  prejudice.  Let  us  pause,  and,  with  that 
immutable  record  before  us,  think  again  before  we  continue 
on  a  course  with  such  far-reaching  consequences. 

So  far  as  party  platforms  are  concerned  we  will  not 


72  The  Panama  Tolls  Controversy 

discuss  them.  They  have  no  standing  or  authority  in  an 
international  dispute  of  this  character. 

When  the  party  platforms  were  adopted  in  1912,  this 
question  was  not  an  international,  or  national,  issue. 
Only  those  people  who  took  official  part  in  formulating, 
negotiating  and  ratifying  the  treaties,  and  passing  this 
act  of  Congress,  were  familiar  with  the  terms  of  the  treat- 
ies, and  the  intent  of  the  high  contracting  parties  as  shown 
by  contemporaneous  acts  and  previous  representations. 

This  is  the  first  time  the  matter  has  ever  confronted 
the  American  people  as  a  live  issue.  The  protest  of  a  great 
and  friendly  nation  made  it  impossible,  in  any  degree  of 
reasonableness  or  honor,  to  await  the  outcome  of  any  kind 
of  available  national  referendum. 

Besides,  it  is  not  a  national  or  domestic  matter,  but 
a  diplomatic  and  international  question  of  law  and  honor, 
based  upon  a  record  made  up — a  completed  record.  The 
unanimous  vote  of  the  American  electorate,  in  favor  of 
the  act,  and  against  the  position  of  the  President,  would 
not  change  the  facts,  and  the  plain  rights  of  the  parties 
in  connection  with  the  international  agreement  under 
which  the  Panama  Canal  Zone  was  leased  by  the  United 
States,  the  canal  was  built  and  must  be  operated,  unless 
the  agreement  between  the  contracting  powers  is  changed. 

The  Constitution  of  the  United  States  is  supreme  and 
not  a  party  platform  if  there  is  a  conflict. 

Article  VI,  Section  2  of  the  United  States  Constitu- 
tion: 

"This  Constitution  and  the  laws  of  the  United  States 
which  shall  be  made  in  pursuance  thereof  and  all  treaties 
made,  or  which  shall  be  made,  under  the  authority  of  the 


Legal  arid  Moral   Aspects  73 

United  States,  shall  be  the  supreme  law  of  the  land,  and 
the  judges  in  any  State  shall  be  bound  thereby,  anything 
in  the  Constitution  or  laws  of  any  State  to  the  contrary 
notwithstanding . ' ' 

Members  of  Congress  take  an  oath  to  uphold  the  Con- 
stitution of  the  United  States  on  entering  upon  the  duties 
of  the  office.  That  is  more  binding  on  them  than  a  party 
platform.  There  ought  to  be  no  conflict  between  party 
platform  and  Constitution.  If  there  is,  the  party  plat- 
form should  be  revised  at  the  earliest  opportunity.  Action 
should  be  in  harmony  with  the  Constitution. 

We  cannot  understand  the  reasoning  and  the  sense 
of  proportion  by  which  men  with  apparently  the  best 
and  most  honorable  intentions,  have  placed  adherence  to 
party  planks  higher  than  a  nation's  solemn  international 
obligations. 

As  stated  in  the  preface  to  this  work  many  entirely 
sincere  persons  have  been  led  astray  on  the  subject  of 
Panama  Canal  tolls-exemption  by  the  popular  assumption 
of  an  entirely  false  promise  as  to  the  record  title  to  the  strip 
of  land  called  the  Canal  Zone.  Article  XIV  of  the  treaty 
with  Panama  states: 

"As  the  price  or  compensation  for  the  rights,  powers 
and  privileges  granted  in  this  convention  by  the  Republic 
of  Panama  to  the  United  States  [notice,  sovereignty  is  not 
mentioned]  the  Government  of  the  United  States  agrees 
to  pay  $10,000,000  in  gold  coin  of  the  United  States  on 
the  exchange  of  the  ratification  of  this  convention  and  also 
an  annual  payment  during  the  life  of  this  convention,  of 
$250,000  in  like  gold  coin,  beginning  nine  years  after  the 
date  aforesaid." 


74  The  Panama  Tolls  Controversy 

It  expressly  states  that  only  rights  are  granted  and 
that  during  the  life  of  the  convention.  These  rights  are 
granted  for  a  price.  The  main  reason  for  the  attitude  of 
most  people,  other  than  those  interested  in  getting  a  dis- 
crimination in  favor  of  coastwise  shipping,  is  an  impres- 
sion, created  by  newspaper  editorials,  that  the  United 
States  owns  the  Canal  Zone,  and  that  like  the  Erie  and 
other  canals  it  runs  through  our  territory. 

That  phase  of  the  matter  is  well  covered  in  an  edi- 
torial of  a  New  York  afternoon  paper  dated  March  27, 
headed  the  "Panama  Lease."  It  expresses  the  situation 
on  that  subject  as  shown  by  the  record. 

"When  the  canal  strip  was  acquired  it  was  not  con- 
tended that  this  country  had  acquired  sovereignty.  The 
matter  is  discussed  in  President  Roosevelt's  message  of 
January  4,  1904,  written  after  the  Panama  revolution  and 
the  negotiation  of  the  treaty  with  the  new  republic.  The 
act  of  Congress  of  June  28,  1902,  covering  the  preliminaries 
for  the  building  of  the  canal,  authorized  the  President  to 
acquire  from  Colombia  'perpetual  control'  of  a  strip  of 
land  six  miles  wide  over  which  this  country,  under  the 
lease,  was  to  have  governmental  jurisdiction.  The  Hay- 
Herran  treaty  negotiated  with  Colombia,  whose  rejection 
by  Colombia  precipitated  the  Panama  revolution,  so  pro- 
vided in  practically  the  same  language  as  that  contained 
in  the  later  treaty  with  Panama.  In  the  message  of  Janu- 
ary 4,  1901,  Mr.  Roosevelt  discussed  whether  the  Hay- 
Herran  treaty  conferred  on  us  sovereign  rights  and  whether 
Colombia  was  warranted  in  rejecting  the  treaty  on  this 
account.     Says  the  message: 

"  'The    treaty,    instead    of    requiring    a    cession    of 


Legal  and   Moral   Aspects  75 

Colombia's  sovereignty  over  the  canal  strip,  expressed, 
acknowledged,  confirmed  and  preserved  her  sovereignty 
over  it.' 

"It  was  never  asserted  until  lately  that  the  canal  is 
exclusively  our  property.  //  ivas  'proclaimed  over  and  over 
again  that  it  was  to  he  a  neutral  waterway  for  the  benefit  of 
the  commerce  of  the  world,  tvith  only  so  much  control  over  it 
by  us  as  ivas  necessary  to  enable  us  to  guarantee  its  neu- 
trality and  to  provide  properly  for  its  guardianship  and 
operation." 

Senator  McCumber  says : 

"When  we  build  a  canal  in  the  United  States  we  do 
not  make  a  contract  with  any  other  nation.  The  fact  that 
we  did  make  a  contract  with  another  nation  concerning 
the  Panama  Canal  presupposes  that  we  did  not  have  a  free 
hand  to  do  just  as  we  pleased,  but  that  we  were  compelled 
to  secure  certain  rights,  and  that  to  secure  those  rights  we 
naturally  were  compelled  to  bind  ourselves  to  certain 
conditions  to  do  something  on  our  part.  And  what  we 
want  to  arrive  at  is  what  we  agreed  to  do.     *     *     * 

"The  remission  of  tolls  to  our  coastwise  vessels,  or 
to  any  other  vessels  belonging  to  the  citizens  of  the  United 
States  or  of  any  other  country,  is  a  clear  violation  of  our 
international  agreement.  When  the  Senate  of  the  United 
States  voted  in  favor  of  the  Hay-Pauncefote  treaty  it  did 
so  on  the  clear  and  unequivocal  understanding  that  this 
treaty  on  which  it  was  voting,  irrespective  of  any  and  all 
previous  utterances  and  declarations  of  the  Government, 
and  irrespective  of  whether  the  old  Clayton-Bulwer  treaty 
was  alive  or  dead,  did  bind  this  country  to  treat  all  vessels 


76  The  Panama   Tolls  Controversy 

of  the  world  on  an  equality  with  our  own  vessels.  I  will 
not  say  that  there  might  not  have  been  some  individual 
Senator  who  might  have  carried  in  the  secret  chambers 
of  his  miud  a  conviction  that  he  could  at  some  future  time, 
if  called  upon,  give  the  treaty  a  different  construction. 
What  I  do  say  is  that  if  he  had  any  such  conviction  he  did 
not  publicly  disclose  it  in  the  debates,  and  he  knew  that 
the  Senate  as  a  body  and  the  Committee  on  Foreign  Rela- 
tions which  reported  the  treaty,  as  clearly  shown  in  its 
reports,  did  understand  that  the  treaty  did  bind  us  to 
this  equality  of  treatment.  And  while  there  was  a  vigorous 
minority  report  by  Senator  Morgan,  that  minority  report 
took  no  issue,  but  confirmed  the  construction  placed  upon 
the  treaty  by  the  majority. 

"With  these  two  reports  before  the  Senate  it  would 
be  a  slander  upon  both  its  judgment  and  its  sense  of  in- 
tegrity to  say  that  while  without  a  word  of  protest  it  voted 
for  this  treaty  that  it  nevertheless  so  voted  with  a  secret 
conviction  that  these  committee  reports,  which  gave  a 
certain  construction  to  the  Hay-Pauncefote  treaty — a 
construction  in  harmony  with  the  views  of  Secretary 
Hay  and  Lord  Pauncefote — could  at  some  future  time 
be  repudiated. 

"I  put  this  question  squarely  up  to  Senators  on  both 
sides  of  this  Chamber:  Admitting  that  the  treaty  by  its 
terms  does  not  preclude  a  construction  authorizing  us  to 
discriminate  in  favor  of  our  own  vessels,  but  that  both 
countries  understood  that  it  did  so,  that  both  Mr.  Hay  and 
Lord  Pauncefote  understood  that  it  did  preclude  us  from 
discriminating  in  favor  of  our  vessels,  and  that  the  Senate 
when  it  confirmed  the  treaty  knew  that  the  parties  under- 


Legal   and    Moral    Ampecls  77 

stood  it  that  way,  aud  the  Senate  as  a  whole  understood 
it  the  same  way,  would  you  then  declare  that,  notwith- 
standing this  mutual  understanding,  we  should  give  it  a 
construction  contrary  to  what  was  then  understood? 

"Or,  putting  it  in  another  form,  if  the  contract  itself 
is  uncertain  as  to  its  intent,  but  the  parties  to  the  contract 
were  agreed  as  to  its  intent  when  they  executed  it,  should 
or  should  not  each  party  be  morally  bound  to  give  the 
contract  a  construction  in  harmony  with  their  intent 
when  they  executed  it? 

*         *         * 

"I  shall  omit  all  the  earlier  history  pertaining  to 
this  question,  every  word  of  which  gives  added  strength 
to  my  contention,  and  immediately  proceed  to  the  condi- 
tions surrounding  the  negotiations  of  the  first  and  second 
Hay-Pauncefote  treaties,  reaching  back  of  that  only  mo- 
mentarily to  draw  from  the  old  Clayton-Bulwer  treaty 
of  1850  only  a  paragraph  always  referred  to  thereafter 
as  the  'general  'principle,''  and  which  was  the  only  part 
of  that  old  agreement  retained,  in  any  form,  in  the  new. 
That  'general  principle'  was  expressed  in  these  words: 

And  the  same  canals  or  railways  being  open  to  the  citizens 
and  subjects  of  the  United  States  and  Great  Britain  on  equal 
terms,  shall  be  open  on  like  terms  to  the  citizens  and  subjects 
of  every  other  State — 

"This  is  our  starting  point.  There  is  the  'general 
principle';  and  while  it  was  reiterated  a  thousand  times 
thereafter,  it  has  never  been  reiterated  in  the  sense  that 
it  has  been  modified. 

"We  start  right  here  from  this  'general  principle,' 
which  guaranteed  equality  of  treatment  to  not  only  vessels 


78  The  Panama  Tolls  Controversy 

of  the  United  States  and  Great  Britain,  but  also  to  vessels 
of  all  other  nations.  Now,  that  'general  principle'  was 
asserted  and  re-asserted  by  both  parties  again  and  again 
down  to  the  adoption  of  the  second  Hay-Pauncefote 
treaty.  Up  to  that  time  it  meant  equality  of  treatment  of 
all  vessels,  including  those  of  the  United  States.  If  it  is 
now  to  have  another  meaning,  that  other  meaning  must 
be  found  either  in  an  expressed  declaration  to  that  effect, 
or  in  a  clear  inference  because  of  change  from  individual 
to  Government  ownership  and  control  of  the  canal. 

^^At  that  time  in  the  discussio7is  in  the  press  of  our  oivn 
country  we  took  the  position  that  the  interest  upon  the  invest- 
ment and  the  operating  expenses  should  he  home  hy  all  vessels 
passing  through  that  canal.  All  our  estimates  for  receipts 
in  tolls  to  repay  interest  included  all  our  vessels,  coastwise 
and  otherwise.     That  was  what  we  understood  on  this  side 

of  the  ocean. 

*         *         * 

"In  closing,  I  cannot  but  feel,  and  deeply  feel,  that 
this  is  not  a  mere  question  of  dollars  and  cents.  The  mat- 
ter of  the  payment  of  these  tolls  is  a  bagatelle,  but  we 
cannot  measure  national  integrity  in  dollars  and  cents. 
We  can  throw  our  dollars  to  the  winds,  but  we  cannot 
throw  national  character  to  the  winds.  The  President 
of  the  United  States  has  taken  a  lofty  stand  in  this  case, 
and  no  matter  whether  we  be  Democrats  or  Republi- 
cans, we  ought  to  stand  by  him  in  his  effort  to  uphold 
the  national  integrity  of  this  Government  in  the  eyes 
of  the  whole  world." 

We  will  now  use  excerpts  from  the  scholarly  speech 
of  Representative  Stevens: 


Legal  and  Moral   Aspects  79 

"It  seems  to  me  that  the  diflFerence  in  the  discussion 
between  the  "two  sides  of  this  question  is  fundamental 
in  this  particular.  Those  of  us  who  contend  for  eciual 
tolls  without  discrimination  as  to  any  nation  believe  that 
the  principal  basis  in  the  settlement  of  this  question 
should  be  international,  and  that  domestic  considerations 
should  be  secondary.  Those  who  differ  with  us  believe 
that  domestic  considerations  should  be  primary  and  that 
international  questions  should  be  secondary.     *     *     * 

"The  geography  of  the  world  clearly  shows  its 
international  importance.  The  Panama  Canal  is  a  strait 
connecting  the  two  greatest  oceans  of  the  world.  Upon 
these  oceans  face  practically  every  great  civilized  and 
commercial  nation  of  the  world.  Upon  these  oceans  has 
been  and  will  be  carried  the  great  mass  of  the  water- 
borne  commerce  of  the  world.  Upon  these  oceans,  as 
we  do,  face  nine  nations,  with  more  or  less  coastwise 
commerce  between  their  coasts.  Upon  these  oceans  front 
the  mother  and  the  colonial  possessions  of  the  most  im- 
portant nations  in  the  world,  and  upon  these  oceans  and 
passing  through  that  canal  will  be  an  increasing  inter- 
course, which  will  change,  more  or  less — probably  more, 
as  the  years  go  on — the  destiny,  political,  commercial 
and  social,  of  all  of  these  great  peoples  and  countries. 
We  must  realize,  then,  that  all  of  these  peoples  and  all 
interests  of  all  nations  are  greatly  interested  in  the  man- 
agement and  operation  of  this  canal.  They  are  interested 
in  their  own  right,  and  they  have  natural,  God-given 
rights  in  this  great  connecting  waterway,  which  must  be 
considered  by  any  just  people  to  whom  may  be  intrusted 
the  task  of  administering  it. 


80  The  Pananta   Tolls  Controversy 

"I  speak  of  natural  rights  in  connection  with  the  use 
of  this  canal  with  reason  and  advertently,  because  our 
country  from  the  beginning  of  its  history  has  insisted 
on  the  natural  rights  of  our  people  and  of  our  commerce 
in  the  use  of  every  connecting  waterway  in  the  world, 
wherever  it  has  seemed  necessary  for  our  people  or  com- 
merce to  properly  go.  From  the  beginning  of  our  Govern- 
ment, since  the  time  when  John  Jay  asserted  that  right 
on  behalf  of  this  country  in  the  British  treaty,  I  think  of 
1794,  and  President  Jefferson  sent  our  heroic  little  Navy 
against  the  Barbary  pirates  to  assert  the  right  of  a  free 
and  open  sea  with  equality  of  treatment,  down  through 
the  discussion  with  Denmark  of  the  right  to  levy  sound 
dues  at  the  entrance  of  the  Baltic,  the  discussion  of  nat- 
ural and  international  rights  in  the  Straits  of  Magellan 
and  the  rights  of  the  nations  in  the  Pacific,  north  and 
south  everywhere,  every  administration  of  every  political 
party  has  insisted  that  American  citizens  and  American 
commerce  should  have  equal  rights  with  every  other  nation 
everywhere  and  at  all  times.  That  has  been  the  true 
American  policj',  the  historic  policy  of  our  country. 

"The  International  Parliamentary  Union  has  col- 
lected and  published  a  very  elaborate  document  upon  the 
subject  of  international  rights  in  maritime  canals.  It 
contains  a  list  of  about  forty  great  straits  and  connect- 
ing waterways  and  canals  in  the  world,  in  which  there 
are  natural  rights  of  an  international  character. 

"In  many  of  these  the  United  States  has  asserted 
its  right  of  equal  treatment,  and  wherever  any  question 
has  arisen,  our  Government  has  insisted  upon  its  right 
of  equal  treatment  for  its  commerce  and   its  citizens 


Legal  and  Moral   Aspects  81 

in  every  one  of  those  waterways.  The  first  time  tliere 
has  been  any  departure  by  our  country  from  this  in- 
variable rule  as  to  equal  treatment  in  the  use  of  any  of  this 
class  of  waterways,  was  the  enactment  of  this  Panama 

bill  of  two  years  ago. 

*  *         * 

"There  is  another  phase  of  our  history  that  should  be 
remembered  and  to  which  I  especially  wish  to  call  the 
attention  of  my  friends  from  New  York  and  California. 
In  1846  we  made  a  treaty  with  New  Granada  concerning 
communications  across  the  Isthmus  of  Panama,  which 
covered  all  kinds  of  transportation.  That  treaty  provided 
that  our  people  and  our  commerce  should  be  treated  on 
equal  terms  with  the  people  and  the  commerce  of  New 
Granada.  You  will  recall  that  was  about  the  time  of  the 
discovery  of  gold  fields  in  California.  Thousands  of  our 
citizens  and  thousands  of  tons  of  our  commerce  passed 
over  that  great  highway.  The  Governments  of  Panama 
and  Colombia  sought  to  discriminate  in  numberless  ways 
against  our  citizens  and  commerce.  They  passed  and  ex- 
ercised various  acts  of  discrimination  against  our  people. 
Our  people  bitterly  complained.  The  records  of  the  State 
Department  contain  hundreds  of  protests,  hundreds  of 
complaints,  from  the  citizens  of  California  and  from  the 
citizens  of  New  York  against  the  Governments  of  Panama 
and  New  Granada.  Our  Presidents,  our  Secretaries  of 
State,    our    ministers,    protested,    sometimes    effectively, 

sometimes  in  vain. 

*  *         * 

"We  protested,  I  say.  Twice  warships  were  sent  to 
enforce  equality  of  treatment,   once  by  a  Democratic 


82  The  Panama  Tolls  Controversy 

administration  and  once  by  a  Republican  administration, 
and  we  forced  New  Granada  and  we  forced  little  Colom- 
bia and  little  Panama  to  yield  to  our  citizens  and  to  our 
commerce  equality  of  treatment  in  the  passage  of  that 
Isthmus. 

"Now,  that  same  treaty  is  in  force.  Secretary  Knox 
officially  notified  the  Committee  on  Interstate  and  Foreign 
Commerce  that  that  same  treaty  is  in  force  and  effect 
right  now.  Secretary  Root  and  Secretary  Hay  based 
their  negotiations  with  Colombia  on  the  fact  that  that 
treaty  is  in  force,     *     *     * 

"We  did  require  Colombia  and  New  Granada  to  yield 
to  us  equality  of  treatment.  While  that  same  treaty  is 
now  in  force,  we  propose  to  continue  a  law  and  adopt  a 
policy  which  shall  forbid  equality  of  treatment  by  us  to 
them.  By  the  law  now  on  the  books  we  propose  to  exer- 
cise the  same  sort  of  discrimination  which  we  sent  war- 
ships and  cannon  to  forbid  them  making  against  us.  I 
leave  it  to  you  to  decide  as  to  the  honesty  and  sincerity 
of  that  nation  and  that  people  who,  after  they  know  the 
facts,  will  insist  upon  that  sort  of  discrimination  and 
inconsistency.     *     *     * 

"Now,  it  is  argued,  and  strongly,  that  because  we 
have  spent  $400,000,000  in  the  construction  of  this  canal 
and  must  defend  and  maintain  it  that  it  is  ours  and  we 
ought  to  have  the  right  to  do  with  it  as  we  please,  and  pre- 
fer and  discriminate  in  favor  of  our  own  people.  Consider 
what  that  argument  really  means.  We  went  upon  that 
great  world  highway  between  the  oceans,  knowing  well 
the  rights  and  interests  of  all  nations  in  it.  We  knew  and 
loudly  claimed  for  many  years  that  this  was  a  great  inter- 


Legal   and   Moral   AspecKf  83 

national  highway  and  that  we  should  insist  upon  our  rights 
of  equal  treatment  in  its  use.  We  said  so  for  fifty  years 
before  we  undertook  its  construction.  When  we  actually 
undertook  the  construction  of  that  highway,  we  entered 
into  an  engagement  with  the  nation  which  owned  the  land 
over  which  it  passed,  and  promised  that  it  should  continue 
to  be  a  highway  for  equal  use  of  all  nations.  We  said  so 
in  pledges  to  the  world ;  we  said  so  in  express  terms  to  the 
nation  which  granted  us  the  land  for  the  highway.  In  the 
very  instrument  of  grant,  the  treaty  with  Panama,  by 
which  the  Canal  Zone  was  ceded  to  us  for  use  as  a  canal, 
among  other  things  two  were  especially  mentioned  by 
Panama,  one  that  her  own  public  vessels  should  use  the 
canal  free  from  tolls,  and  second,  that  all  vessels  of  all 
nations  should  be  equally  treated,  and  that  there  should 
be  no  discrimination  to  or  for  any  traffic  of  any  nation. 
These  are  express  conditions  of  the  grant  by  which  we 
acquired  the  Canal  Zone.  Shall  we  now  repudiate  these 
pledges  and  these  promises  as  to  this  waterway.'' 

"Senator  Davis,  in  his  great  report,  well  said  that — 

Our  Government  or  our  people  will  furnish  the  money  to 
build  the  canal  presents  the  single  question  whether  it  is  profit- 
able to  do  so.  If  the  canal,  as  property,  is  worth  more  than  its 
cost  we  are  not  called  on  to  divide  the  profits  with  other  nations. 
If  it  is  worth  less  and  we  are  compelled  by  national  necessities 
to  build  the  canal,  we  have  no  right  to  call  on  other  nations  to 
make  up  the  loss  to  us.  In  any  view  it  is  a  venture  that  we  will 
enter  upon  if  it  is  to  our  interest,  and  if  it  is  otherwise  we  will 
withdraw  from  its  further  considerations. 
*  *  * 

"When  we  commenced  that  great  undertaking  we 
knew  what  we  were  about  to  do.  We  went  into  it  with  our 
eyes  wide  open,  and  told  the  world,  and  especially  our 


84  The  Panama   Tolls  Controversy 

neiglibors,  of  our  intention;  and  now  that  it  is  finished, 
do  the  American  people  mean  to  say  that  because  we  want 
it,  because  we  are  big  and  it  is  big,  we  will  do  as  we  please 
regardless  of  the  promises  in  the  past? 

*         *         * 

"Article  II  provides  three  methods  for  constructing 
the  canal:  First,  by  the  United  States  itself,  at  its  own 
cost;  second,  by  individuals  or  corporations  whom  the 
United  States  might  assist  by  loan  or  gift  of  money;  third, 
by  individuals  or  corporations  with  whom  the  United 
States  may  co-operate  through  subscription  to  or  purchase 
of  stock  or  shares.    Article  II  is  as  follows: 

Article  II.  It  is  agi*eed  that  the  canal  may  be  constructed 
under  the  auspices  of  the  Government  of  the  United  States, 
either  directly  at  its  own  cost  or  by  gift  or  loan  of  money  to 
individuals  or  corporations  or  through  subscription  to  or  pur- 
chase of  stock  or  shares,  and  that,  subject  to  the  provisions  of 
the  present  treaty,  the  said  Government  shall  have  and  enjoy  all 
the  rights  incident  to  such  construction,  as  well  as  the  exclusive 
right  of  providing  for  the  regulation  and  management  of  the  canal. 

"Necessarily  the  rules  as  to  the  use  of  the  canal 
prescribed  in  Section  1,  Article  III,  as  to  equality,  must 
apply  in  the  same  way  to  all  of  these  methods  of  con- 
struction and  to  whichever  one  of  them  may  be  adopted. 
There  is  nothing  in  the  treaty  indicating  any  different 
treatment  of  American  vessels,  whether  the  canal  be 
constructed  by  private  corporations  or  by  the  Govern- 
ment itself.  This  being  true,  with  no  provision  in  the 
treaty  granting  any  preferential  right  or  privilege,  but, 
on  the  contrary,  the  strongest  kind  of  language  forbidding 
it,  it  must  be  difficult  for  any  impartial  person  to  fairly 
contend  that  a  corporation  constructing  the  canal  at  its 


Legal   and   Moral   Aspects  86 

own  expense  and  operating  it  for  a  profit,  as  the  Suez 
Canal  was  constructed  and  is  operated,  can,  under  these 
circumstances  and  conditions,  be  compelled  to  give 
free  passage  to  a  large  class  of  vessels  possibly  yielding 
a  larger  profit  to  their  owners,  owned  by  other  corpo- 
rations or  interests  not  named,  described,  or  excepted 
anywhere  in  the  treaty. 

"It  is  submitted  that  under  this  treat}'  any  corpo- 
ration constructing  and  operating  the  canal  under  this 
provision  would  not  be  compelled  to  relinquish,  without 
consideration,  any  of  its  legitimate  revenues  to  another 
corporation  owning  and  operating  American  ships  in  the 
coastwise  trade. 

"Exactly  the  same  rule  must  apply  to  the  construction 
and  operation  by  the  United  States  itself  as  by  a  private 
corporation  doing  the  same  thing,  because  the  same 
language  and  the  same  authority  and  rules  apply  to  both. 
There  can  be  no  exception  in  one  case  unless  it  can  also 
be  an  exception  in  the  other. 

"It  can  hardly  be  argued  that  the  United  States 
might  exact  as  a  condition  of  any  grant,  aid,  or  subscrip- 
tion that  there  should  be  a  preference  or  discrimination 
to  the  vessels  of  commerce  of  its  citizens,  because  that 
very  thing  is  expressly  forbidden  by  the  broad  terms  of 
Section  1,  Article  III,  prohibiting  any  such  exception 
or  condition. 

"Any  other  stockholder  or  guarantor  could  have 
as  much  right  to  exact  his  own  private  conditions  for  his 
own  private  advantage,  with  the  result  that  the  enter- 
prise would  face  ruin  from  the  start.  The  treaty  gives 
the  United  States  as  a  stockholder  or  guarantor  no  other 


86  The  Panama  Tolls  Controversy 

rights  than  any  other  interest  also  assisting  in  the  enter- 
prise. A  British,  German,  French  or  Japanese  steamship 
company  might  subscribe,  own  and  hold  large  blocks  of 
stock  or  bonds  in  a  corporation  provided  in  section  2, 
and  with  equal  right  under  the  treaty  might  demand  a 
preference  for  its  vessels  as  an  exception  on  account  of 
such  ownership.  Of  course  such  a  demand  would  be 
absurd  and  unjust,  and  yet  equally  valid  and  equitable 
as  a  similar  demand  and  exception  for  the  United  States. 
The  terms  of  the  treaty  and  the  existing  situation  would 
seem  to  practically  and  legally  make  the  United  States  a 
corporation  sole,  for  the  purpose  of  constructing,  operating, 
and  managing  the  canal,  icith  exactly  the  same  rights,  obli- 
gations and  responsibilities  which  would  pertain  to  any 
other  corporation  provided  for  by  the  treaty,  doing  exactly 
the  same  thing  under  the  treaty.  But  as  an  incident  to 
ownership,  the  vessels  of  the  owner,  used  for  its  own  purposes 
in  coymection  with  the  project,  could  undoubtedly  be  passed. 
A  corporation  coidd  pass  its  vessels  used  for  canal  purposes. 
Equally  the  United  States  as  a  sovereign  passes  its  public 
vessels  used  for  its  own  purposes.  That  is  what  this  sec- 
tion means.  But  its  qualifying  phrases  clearly  exclude 
the  vessels  and  commerce  of  all  else  than  of  the  owner,  the 
sovereign  in  the  case  of  the  United  States.  The  article 
clearly  grants  rights  to  the  vessels  belonging  to  the 
sovereign  and  as  clearly  puts  vessels  belonging  to  the  citi- 
zens of  that  sovereign  on  the  same  terms  as  vessels  of  the 
citizens  of  all  nations. 

"One  of  the  principal  arguments  that  the  United 
States  is  not  included  within  the  terms  *of  all  nations 
observing  these  rules,'  is  that  because  the  United  States 


Legal   and   Moral   Aspects  87 

is  required  to  make  and  promulgate  the  rules,  the  treaty 
should  not  be  construed  as  holding  that  the  nation  which 
makes  the  rules  should  be  included  within  or  bound  by 
the  rules  to  be  promulgated  by  itself.  This  is  clearly 
fallacious,  because  Article  II  provides  that  'subject  to 
the  provisions  of  the  treaty'  the  United  States  shall  have 
the  rights  incident  to  such  construction,  and  so  forth. 
That,  of  course,  applies  the  remaining  portion  of  the 
treaty  to  the  rights  of  ownership.  The  remaining  portions 
of  the  treaty  are  Articles  III  and  IV  containing  the  rules 
framed  upon  the  rules  governing  the  Suez  Canal.  These 
rules  at  Suez  and  the  similar  ones  at  Panama  embrace 
all  vessels  of  commerce  of  all  nations.  An  inspection  of 
the  rules  themselves  clearly  shows  that  they  do  apply 
and  were  intended  to  apply  to  the  United  States. 

"It  must  be  admitted  that  the  last  sentence  of  Sec- 
tion 1,  Article  III,  applies  to  the  United  States,  'such 
conditions  and  charges  of  traffic  shall  be  just  and  equit- 
able.' If  not,  then  this  nation  can  make  unjust  rules 
which  would  practically  make  the  canal  useless  to  the 
other  nations.  Again,  the  last  sentence  of  Section  2 
applies  in  terms  'the  United  States,  however,  shall  be  at 
liberty  to  maintain  such  military  police  along  the  canal 
as  may  be  necessary  to  protect  it  against  lawlessness 
and  disorder.'  It  is  difficult  to  argue  that  such  language 
does  not  apply  to  the  United  States.  Section  5  provides 
that  the  provisions  'of  this  section  shall  apply  to  water- 
ways adjacent  to  the  canal  within  three  marine  miles 
of  either  end.'  This  was  inserted  because  both  Great 
Britain  and  the  United  States  at  various  times  had  in- 
sisted that  the  three-mile  limit  might  be  extended  under 


88  The  Panama  Tolls  Controversy 

certain  conditions.     It  was  agreed  here  clearly  that  the 

three-mile  limit  shall  apply  as  one  of  the  rules  binding  the 

United  States  in  its  treatment  of  the  canal,  except  in  time 

of  war.    Section  6  binds  the  United  States  itself  in  the  time 

of  war  and  peace  to  maintain  the  integrity  of  the  canal 

plant.    This  is  the  main  purpose  of  this  section.     So  any 

reasonable  examination  of  these  rules  clearly  shows  that  they 

do  apply  to  and  bind  the  United  States  and  were  so  intended 

when  framed.     One  other  thought  in  this  connection:    The 

preamble  applies  the  general  principle  of  neutralization  to 

these  rules,  as  set  forth  in  Article   VIII  of  the  Clayton- 

Bulwer  treaty.     This  principle  is  for  equality  and  equity  of 

treatment  of  all — the  essence  of  these  rules.     The  preamble 

binds  the  whole  treaty,  and  so  the  United  States.    Of  course, 

as  it  has  been  heretofore  stated,  that  in  the  time  of  war  the 

treaty  ceases  to  operate  and  the    United  States  may  adopt 

any  means  necessary  for  its  defense  and  temporarily  close 

the  canal. 

*         *         * 

"In  the  construction  of  the  controverted  clauses  of 
any  document  it  is  always  of  prime  importance  to  know 
exactly  what  the  persons  themselves  intended  by  the  lan- 
guage which  is  subject  to  dispute;  and  when  they  have 
set  forth  their  own  ideas  as  to  its  intention  and  meaning 
and  have  given  good  reasons  for  it,  usually  such  facts  have 
been  conclusive  as  to  the  construction  whenever  the  lan- 
guage has  fairly  allowed. 

"The  negotiations  for  the  modification  of  the  Clayton- 
Bulwer  treaty  and  for  the  framing  of  the  Hay-Pauncefote 
treaty  were  commenced  by  Secretary  of  State  John  Hay 
by  a  letter,  December  7,  1898,  to  Hon.  Henry  White, 


Legal  and  Moral   Aspects  89 

charg^  at  London,  and  the  reply  of  Mr.  White,  of  date 
December  22,  1898.     *     *     * 

"From  these  and  other  letters  it  appears  in  at  least 
three  diflferent  places  that  the  first  and  necessary  condition 
of  a  treaty  must  be  that  all  vessels  of  all  nations  must  receive 
in  the  use  of  the  canal  the  same  terms  and  treatment  as  Ameri- 
can vessels.  This  condition  was  emphasized  more  than  any 
other  one  provision,  and  descriptive  references  were  for- 
warded to  make  it  clear  that  such  clause  must  include  all 
vessels  of  all  classes,  foreign  and  coastwise,  so  there  could  be 
no  mistake  about  the  meaning  of  any  language  in  the 
treaty. 

"Secretary  Hay  and  our  Government  readily  agreed 
to  such  condition,  and  nobody  objected  to  it,  because  it 
has  always  been  the  consistent,  continuous  and  historic 
policy  of  our  Government  for  more  than  fifty  years  to  do  that 

identical  thing. 

*         *         * 

"So  Secretary  Hay,  with  the  approval  of  President 
McKinley  and  the  proper  officials  of  the  United  States, 
prepared  the  Hay-Pauncefote  treaty  and  submitted  it  to 
Great  Britain.  In  it  were  placed  the  clauses,  heretofore 
referred  to,  maintaining  the  general  principle  of  'equality 
and  neutrality,'  and  expressly  setting  forth  in  as  clear  and 
expUcit  language  as  possible  'that  the  vessels  of  commerce 
and  war  of  all  nations  should  be  treated  on  terms  of  entire 
equality,  so  that  there  shall  be  no  discrimination  against 
any  nation,  its  citizens  or  subjects,  in  respect  of  the  con- 
ditions or  charges  of  traffic  or  otherwise.'  Not  a  hint  of 
any  exception  for  our  commerce,  or  any  other  exception; 
but  on  the  contrary,  the  correspondence  showed  that  all 


90  The  Panama   Tolh  Controversy 

officials  intended  clearly  and  beyond  question  that  'all 
vessels,  commerce  and  citizens  must  be  treated  exactly 
alike.' 

"Surely  this  preliminary  history,  these  negotiations, 
the  language  itself,  the  preamble  and  then  the  proclama- 
tion, in  terms  following  and  adopting  the  language,  should 
be  sufficient  to  show  that  no  ambiguity  or  implication  of 
any  other  meaning  could  possibly  exist.  In  ordinary  cases 
it  would  be  sufficient,  and  no  further  question  could  be 
raised.  But  one  additional  fact  still  further  re-enforces 
this  history  and  construction. 

"At  that  time  the  ambassador  of  the  United  States 
to  Great  Britain  was  the  Hon.  Joseph  H.  Choate.  He  was 
absent  at  the  time  the  negotiations  were  commenced,  but 
returned,  and,  of  course,  became  intimately  acquainted 
with  the  proceedings  as  to  both  treaties.  In  a  recent  ad- 
dress he  has  stated  emphatically  his  own  recollections  and 

understanding  of  the  occurrences  at  that  time. 

*         *         * 

It  is  true  that  I  had  something  to  do  with  the  negotiation 
of  this  treaty.  In  the  summer  of  1901 — you  will  remember  that 
this  treaty  was  ratified  by  the  Senate  in  November,  1901 — I 
was  in  England  until  October  and  was  in  almost  daily  contact 
with  Lord  Pauncefote,  who  on  his  side  represented  Lord  Lans- 
downe,  the  foreign  secretary,  and  was  also  in  very  frequent  corre- 
spondence with  Mr.  Hay,  our  Secretary  of  State,  under  whom  I 
was  acting.  As  the  lips  of  both  of  these  diplomatists  and  great 
patriots,  who  were  each  true  to  his  own  country  and  each  regard- 
ful of  the  rights  of  the  other,  are  sealed  in  death,  I  think  it  is 
quite  proper  that  I  should  say  what  I  believe  both  of  them,  if 
they  were  here,  would  say  today — that  the  clause  in  the  Panama 
Canal  bill  exempting  coastwise  American  shipping  from  the 
payment  of  tolls  is  in  direct  violation  of  the  treaty. 

I  venture  to  say  now  that  in  the  whole  course  of  the  negotia- 
tion of  this  particular  treaty  no  claim,  no  suggestion,  was  made 


Legal  and  Moral   Aspects  91 

that  there  shoxild  be  any  exemption  of  anybody.  How  could 
there  be  in  face  of  the  words  they  agreed  upon.'  Lord  Paunce- 
fote  and  John  Hay  were  singularly  honest  and  truthful  men. 
They  knew  the  meaning  of  the  EngUsh  language,  and  when 
they  agreed  upon  the  language  of  the  treaty  they  carried  out  the 
fundamental  principle  of  their  whole  diplomacy,  so  far  as  I  know 
anything  about  it,  and  in  the  six  years  I  was  engaged  with 
them  their  cardinal  rule  was  to  mean  what  they  said  and  to  say 
what  they  meant. 

"Only  a  few  weeks  ago  Hon.  Henry  White  delivered  an 
address  in  Washington,  in  which  he  clearly  and  strongly 
affirmed  the  terms  stated  in  the  original  note  and  corre- 
spondence, that  the  intention  always  existed  on  the  part  of  all 
the  officials  of  both  Governments  that  vessels  of  commerce 
of  both  and  all  nations  should  always  be  treated  on  terms  of 
entire  equality.  This  would  include  all  trade — foreign  and 
coastwise.  Mr.  White  has  a  more  intimate  knoivledge  of  the 
actual  transactions  than  any  living  man,  and  his  statement 
should  be  conclusive  with  fair  and  just  men." 

Senator  Root's  speeches  of  January  21,  1913,  and 
May  21,  1914,  are  equal  to  the  best  forensic  efforts  in  the 
United  States  Senate.  In  the  excerpts  therefrom  which 
follow,  the  Senator  advances  a  new  argument  for  tolls- 
exemption  repeal  which  is  sui  generis. 

ARTICLE  III 

The  United  States  adopts,  as  the  basis  of  the  neutralization 
of  such  ship  canal,  the  following  rules,  substantially  as  embodied 
in  the  convention  of  Constantinople,  signed  the  twenty-eighth 
of  October,  1888,  for  the  free  navigation  of  the  Suez  Canal;  that 
is  to  say : 

"1.  The  canal  shall  be  free  and  open  to  the  vessels  of  com- 
merce and  of  war  of  all  nations  observing  these  rules,  on  terms 
of  entire  equality,  so  that  there  shall  be  no  discrimmation 


92  J'he  Panama  Tolls  Controversy 

against  any  such  nation  or  its  citizens  or  subjects  in  respect  of 
the  conditions  or  charges  of  traffic,  or  otherwise.  Such  condi- 
tions and  charges  of  traffic  shall  be  just  and  equitable." 


"What    is    the    'entire    equality'    contemplated    by 

Rule  1  of  Article  III  of  this  treaty?    Is  it  entire  so  that  it 

assures  equality  in  comparison  with  all  ships  engaged  in 

the  same  trade  similarly  situated,  the  same  kind  of  trade, 

or  is  it  partial,  so  as  to  be  equality  in  comparison  only 

with  certain  ships  engaged  in  the  same  kind  of  trade  and 

not  applying  to  other  ships  engaged  in  the  same  kind  of 

trade,  to  wit,  not  applying  to  ships  which  are  owned  by 

American  citizens? 

*         *         * 

"Is  the  kind  of  equality  that  is  assured  such  that  there 
will  be  no  discrimination  or  that  there  will  be  no  discrimin- 
ation except  against  the  ships  of  other  nations  and  in  favor 
of  ships  belonging  to  American  citizens? 

"Now,  let  us  examine  the  question  in  the  light  of  the 
circumstances  which  surrounded  the  making  of  this  treaty 
and  the  conditions  under  which  it  was  made.  Treaties 
cannot  be  usefully  interpreted  with  the  microscope  and 
the  dissecting  knife  as  if  they  were  criminal  indictments. 
Treaties  are  steps  in  the  life  and  development  of  great 
nations.  Public  policies  enter  into  them;  public  policies 
certified  by  public  documents  and  authentic  expressions 
of  public  officers.  Long  contests  between  the  representa- 
tives of  nations  enter  into  the  choice  and  arrangement  of 
the  words  of  a  treaty.  If  you  would  be  sure  of  what  a 
treaty  means,  if  there  be  any  doubt,  if  there  are  two  inter- 
pretations suggested,  learn  out  of  what  conflicting  public 


Legal  and   Moral   Aspedn  dS 

iwlicies  the  words  of  the  treaty  had  their  birth;  what  argu- 
ments were  made  for  one  side  or  the  other,  what  conces- 
sions were  yielded  in  the  making  of  a  treaty.  Always, 
with  rare  exceptions,  the  birth  and  development  of  every 
important  clause  may  be  traced  by  the  authentic  records 
of  the  negotiators  and  of  the  countries  which  are  recon- 
ciling their  differences.  So  it  is  the  universal  rule  in  all 
diplomatic  correspondence  regarding  international  rights, 
in  all  courts  of  arbitration,  that  far  more  weight  is  given  to 
records  of  negotiations,  to  the  expressions  of  the  negotia- 
tors, to  the  history  of  the  provisions  than  is  customary  in 
regard  to  private  contracts  or  criminal  indictments. 

"This  question  as  to  the  kind  of  equality  that  the 
makers  of  this  treaty  intended  to  give  divides  itself  very 
clearly  and  distinctly  into  a  question  between  two  per- 
fectly well-known  expedients  of  treaty  making;  one  is 
the  favored-nation  provision,  with  which  we  are  all  verj'^ 
familiar  in  commercial  treaties,  and  the  other  is  the  pro- 
vision according  to  citizens  of  another  country  rights 
measured  by  the  rights  of  the  nationals  or  citizens  of  the 
contracting  country.  The  most-favored-nation  provision 
has  its  most  common  expression  in  the  provision  regarding 
tariff  duties,  a  provision  that  no  higher  duties  shall  be 
charged  upon  goods  imported  from  one  foreign  country 
than  upon  goods  imported  from  other  foreign  countries. 

That  is  the  common  'most-favored-nation  clause.' 

*         *         * 

"A  careful  examination  shows  this  to  be  a  fact:  That 
it  is  the  universal  rule,  with  rare  exceptions,  that  wherever 
the  rights  of  the  citizens  of  a  contracting  country  can  be 
made  the  standard  of  equality  for  the  citizens  of  another 


94  The  Panama   Tolls  Controversy 

country  they  are  made  so,  and  that  recourse  is  not  had  to 
the  most-favored-nation  clause,  escept  where  that  higher 
degree  of  equality  is  impossible  because  the  citizens  of  the 
two  countries  occupy  different  relations  to  the  business 
that  is  contemplated. 

"So  we  have  the  question  between  these  two  kinds 
of  equality  clearly  drawn  and  resting  upon  long  experience 
of  nations,  a  subject  fully  understood  by  the  negotiators  of 
this  treaty  upon  both  sides. 

"We  know  now  that  the  negotiators  of  this  treaty, 
the  men  who  made  it,  all  understood  that  the  larger  equal- 
ity was  intended  by  its  terms.  Of  course,  what  the  negoti- 
ator of  a  treaty  says  cannot  be  effective  to  overthrow  a 
treaty;  but  I  think  we  must  all  start,  in  considering  this 
question,  with  the  assumption  that  the  words  are  capable 
of  two  constructions.  I  think  no  one  can  deny  that,  in 
view  of  the  differences  of  opinion  which  have  been  ex- 
pressed here  regarding  their  meaning.  So  here  are  words 
capable  of  two  constructions,  a  broad  construction  and  a 
narrow  construction,  but  the  fact  that  all  the  makers  of 
the  treaty  intended  that  the  words  they  used  should  have 
the  larger  effect  is  certainly  very  persuasive  toward  the 
conclusion  that  those  words  should  receive  the  larger 
effect.  Not  only  the  American  negotiators  but  the  British 
negotiators  as  well  so  understood  it.  Whenever  we  seek 
to  impose  upon  these  words  a  narrower  construction  for 
our  own  interests  than  the  makers  of  the  treaty  under- 
stood them  to  have,  we  should  remember  the  fundamental 
rule  of  morals  that  a  promiser  is  bound  to  keep  a  promise 
in  the  sense  in  which  he  had  reason  to  believe  the  promisee 
understood  it  was  made.     *     *     * 


Legal  and   Moral   Aspects  95 

"The  kind  of  equality  which  the  negotiators  in- 
tended— that  is,  an  equaHty  in  which  the  treatment  of 
American  citizens  is  made  the  standard  for  the  treatment 
of  foreign  citizens — had  during  all  the  history  of  the 
Isthmian  Canal  efforts  been  the  standard  sought  for  in 
negotiations  and  treaties.  That  kind  of  equality  was  the 
standard  adopted  by  the  public  policy  of  the  United  States 
for  all  similar  enterprises.  It  was  customary;  it  was 
uniform;  it  was  natural  for  negotiators  of  a  treaty 
relating  to  a  canal.  Let  me  illustrate  that  by  referring 
to  the  initial  treaty  on  this  subject,  the  treaty  of  New 
Granada  of  1846.  When  the  American  negotiators  making 
that  treaty  dealt  with  the  subject  of  a  railroad  and  canal, 
what  kind  of  equality  did  they  stipulate  for?    Why,  this: 

The  Government  of  New  Granada  guarantees  to  the  Gov- 
ernment of  the  United  States  that  the  right  of  way  or  transit 
across  the  Isthmus  of  Panama  upon  any  modes  of  communica- 
tion that  now  exist,  or  that  may  be  hereafter  constructed,  shall 
be  open  and  free  to  the  Government  and  citizens  of  the  United 
States,  and  for  the  transportation  of  any  articles  of  produce, 
manufactures  or  merchandise  of  lawful  commerce  belonging  to 
the  citizens  of  the  United  States;  that  no  other  tolls  or  charges 
shall  be  levied  or  collected  upon  the  citizens  of  the  United  States 
of  their  said  merchandise  thus  passing  over  any  road  or  canal 
that  may  be  made  by  the  Government  of  New  Granada  or  by 
the  authority  of  the  same  than  is,  under  like  circumstances,  lev- 
ied upon  and  collected  from  the  Granadian  citizens. 

"The  message  of  President  Polk  transmitting  this 
New  Granada  treaty  of  1846  to  Congress  dwells  especially 
upon  the  assurance  to  citizens  of  the  United  States  of  equal 
charges  and  equal  facilities  in  the  use  of  railroad  and 
canal  with  citizens  of  New  Granada, 

"I  go  back  again  to  the  Clayton-Bulwer  treaty  of 


96  The  Panama  Tolls  Controversy 

1850.    There  is  no  doubt  about  the  kind  of  equality  which 
the  negotiators  considered  it  to  be  valuable  to  get,  useful 

to  get,  natural  to  get. 

*  *         * 

"Article  VIII  provides  that — 

It  is  always  understood  by  the  United  States  and  Great 
Britain  that  the  parties  constructing  or  owning  the  canal  shall 
impose  no  other  charges  or  conditions  of  traffic  thereupon 
than  are  just  and  equitable,  and  that  the  same  canals  or  rail- 
ways, being  open  to  the  citizens  and  subjects  of  the  United 
States  and  Great  Britain  on  equal  terms,  shall  also  be  open  on 
hke  terms  to  the  citizens  and  subjects  of  every  other  State. 

"You  will  perceive,  sir,  that  the  terms  on  which  citi- 
zens of  other  countries  were  to  be  allowed  to  come  in  were 
not  terms  of  the  most-favored  nations  as  among  themselves. 
They  were  on  like  terms  with  those  which  existed  between 
Great  Britain  and  the  United  States;  that  is  to  say,  each 
other  country  which  came  in  and  adhered  to  this  Clayton- 
Bulwer  treaty  was  to  have  the  rights  of  its  citizens  meas- 
ured by  the  rights  accorded  to  the  citizens  of  the  United 
States  and  to  the  citizens  of  Great  Britain. 

*  *         * 

"We  are  asked  to  believe  that  starting  with  the  Clay- 
ton-Bulwer  convention,  which  gave  to  Great  Britain 
unquestioned  assurance  of  the  larger  and  more  valuable 
equality  of  her  vessels  with  the  vessels  of  American  citi- 
zens, in  a  negotiation  with  a  country  which  in  all  its  his- 
tory had  insisted  regarding  all  canals  that  the  measure  of 
equality  should  be  the  measure  of  service  and  of  charges 
to  its  national  citizens,  abandoned  the  vantage  ground  of 
the  Clayton-Bulwer  treaty  and  gave  up  that  basis  of 
equality  without  one  word  in  the  negotiation,  without 


Legal  and  Moral   Aspects  97 

discussion,  without  its  being  asked,  without  its  being 
mentioned  without  its  knowing  it,  without  the  other, 
negotiators  knowing  it.     But  that  is  not  all. 

"It  was  not  merely  the  immemorial  policy  of  the 
United  States  and  Great  Britain  regarding  all  canals;  it 
was  not  merely  the  general  public  policy  of  the  United 
States  and  Great  Britain  regarding  all  ports  and  waters, 
but  it  was  the  policy  of  the  United  States  regarding  trade 
the  world  over,  and  the  champion  and  protagonist  of  that 
policy  was  John  Hay.  At  the  very  time  that  he  was  ne- 
gotiating the  Hay-Pauncefote  treaty  he  was  appealing 
to  the  justice  of  all  the  nations  of  the  world  for  the  'open 
door'  in  China;  he  was  appealing  to  them  in  the  interest 
of  the  world's  commerce,  in  the  interest  of  civilization  to 
accord  in  all  their  possessions  in  China,  what?  Favored- 
nation  treatment?  Oh,  no;  the  same  treatment  that  they 
accorded  to  their  own  citizens.  Let  me  ask  you  to  attend 
for  a  moment  to  things  that  John  Hay  wrote  regarding 
this  great  design,  the  accomplishment  of  which  will  ever 
stand  in  the  history  of  diplomacy  as  one  of  the  proudest 
contributions  of  America  to  the  progress  of  civilization. 
On  September  6,  1899,  he  wrote  to  Mr.  Choate  in  London: 

The  Government  of  Her  Britannic  Majesty  has  declared 
that  its  policy  and  its  very  traditions  precluded  it  from  using  any 
privileges  which  might  be  granted  it  in  China  as  a  weapon  for 
excluding  commercial  rivals,  and  that  freedom  of  trade  for 
Great  Britain  in  that  Empire  meant  freedom  of  trade  for  all  the 
world  alike.  While  conceding  by  formal  agreements,  first  with 
Germany  and  then  with  Russia,  the  possession  of  "spheres  of 
influence  or  interest"  in  China,  in  which  they  are  to  enjoy  special 
rights  and  privileges,  more  especially  in  respect  of  railroads  and 
mining  enterprises.  Her  Britannic  Majesty's  Government  ha.s 
therefore  sought  to  maintain  at  the  same  time  what  is  called 


98  The  Panama   Tolls  Controversy 

the  "open-door  policy"  to  insure  to  the  comnaerce  of  the 
world  in  China  equality  of  treatment  within  said  "spheres" 
for  commerce  and  navigation. 


"So  he  wrote  all  of  the  great  nations  of  the  world  an 
appeal  for  equal  treatment,  an  appeal  for  a  specific  stipu- 
lation to  secure  the  equal  treatment  that  no  higher  charges 
should  be  imposed  upon  the  citizens  of  any  other  country 
in  the  ports  and  waters  possessed  by  those  great  powers 
in  China  or  for  freight  or  passage  over  the  railroads  built 
and  controlled  by  them  than  were  imposed  upon  their  own 
citizens.  To  that  appeal  all  the  great  powers  of  the  world 
responded  in  affirmance;  and  on  the  twentieth  of  March, 
1900,  Mr.  Hay  was  able  to  issue  his  circular  of  instructions 
to  all  the  ambassadors  and  ministers  of  the  United  States 
announcing  the  universal  assent  of  the  world  to  that 
great  principle  of  equality — equality  measured  by  the 
rights  of  the  citizens  of  the  nation  granting  it  in  all  the 
Empire  of  China;  yet  we  are  asked  to  believe  that  John 
Hay  denied,  abjured,  repudiated  that  policy  of  civiliza- 
tion in  regard  to  the  Panama  Canal  at  the  very  moment 
that,  through  the  same  agents,  he  was  enforcing  the  policy 
upon  the  same  countries;  and  that  he  did  it  without  know- 
ing it. 

"But,  we  are  not  left  to  inferences  which  must  be 
drawn  from  the  circumstances  that  I  have  mentioned  or 
from  declarations  of  public  policy  or  from  the  uniform 
course  and  custom  of  treaty  making  regarding  canals 
and  regarding  public  waters  and  transportation.  There 
is  positive,  and  it  appears  to  me  conclusive,  aflSrmative 
evidence   that   the   negotiators   did   eflPectively   proceed 


Legal   and    Moral    Aspects  99 

in  making  this  treaty  in  accordance  willi  the  honorable 
obligation  of  their  conntry  as  the  builder  and  maintainer 
of  a  public  utility,  as  the  champion  of  equal  coniniercial 
rights  the  world  over. 

"We  begin  the  consideration  of  the  express  provisions 
leading  to  the  conclusion  that  the  larger  equality  was 
intended  with  the  communication  of  the  Hay-Pauncefote 
treaty  to  the  Senate.  Of  course,  we  are  all  familiar  with 
the  terms  of  the  preamble  preserving  the  general  prin- 
ciple of  Article  VIII  of  the  Clayton-Bulwer  treaty.  Let 
me  read  them  again,  however,  for  convenience  of  reference: 

The  United  States  of  America  and  His  Majesty  Edward 
the  Seventh,  of  the  United  Kingdom  of  Great  Britain  and 
Ireland,  and  of  the  British  dominions  beyond  the  seas,  King, 
and  Emperor  of  India,  being  desirous  to  facilitate  the  construc- 
tion of  a  ship  canal  to  connect  the  Atlantic  and  Pacific  Oceans, 
by  whatever  route  may  be  considered  expedient,  and  to  that  end 
to  remove  any  objection  which  may  arise  out  of  the  convention 
of  the  nineteenth  of  April,  1850,  commonly  called  the  Clayton- 
Bulwer  treaty,  to  the  construction  of  such  canal  under  the 
auspices  of  the  Government  of  the  United  States,  without  im- 
pairing the  "general  principle"  of  neutralization  established  in 
Article  VIII  of  that  convention.     *     *     * 

"Now  we  are  told  that  the  language  of  a  treaty  or 
of  a  contract  or  of  a  statute  cannot  be  changed  by  the 
preamble;  but  what  is  the  purpose  of  a  preaml)le?  The 
purpose  is  to  afford  a  guide  to  the  interpretation  of  the 
terms  of  the  treaty  or  of  the  statute.  When  you  start 
with  the  third  article  of  the  Hay-Pauncefote  treaty  and 
have  a  debate  as  to  its  interpretation,  you  turn  to  the 
preamble  and  you  find  there  a  guide  intended  by  the 
makers  of  the  treaty  to  enable  you  to  reach  the  right 
interpretation  upon  the  terms  of  the  third  article.     But, 


100  The  Panama   Tolls  Controversy 

still  further  than  that,  the  idea  of  not  impairing  the 
general  principle  of  neutralization  is  carrried  into  the 
treaty  itself,  for  in  Article  IV — 

It  is  agreed  that  no  change  of  territorial  sovereignty  or  of 
international  relations  of  the  country  or  countries  traversed  by 
the  before-mentioned  canal  shall  affect  the  general  principle  of 
neutralization  or  the  obligation  of  the  high  contracting  parties 
under  the  present  treaty. 

"That  is,  repeating  in  the  fourth  article  as  being  a 
part  of  the  treaty  itself,  the  words  of  the  preamble  that 
the  obstacles  of  the  Clayton-Bulwer  treaty  are  to  be 
removed  without  impairing  the  general  principle  of  neu- 
tralization established  in  Article  VIII  of  that  convention. 
"This  preamble,  sir,  which  refers  to  the  general 
principle  of  neutralization  in  the  Clayton-Bulwer  treaty 
and  which  manifestly  is  designed  to  preserve  in  the  Hay- 
Pauncefote  treaty  something  of  the  Clayton-Bulwer 
treaty,  has  been  treated  in  discussion  as  being  a  matter 
of  not  very  much  importance.  Not  so  the  view  of  the 
negotiators  of  the  treaty.  Not  so  the  view  of  anybody 
connected  with  our  Government  at  the  time  the  treaty 
was  made,  for  you  will  perceive,  in  the  first  place,  that 
in  the  letters  of  transmittal  of  the  treaty  special  pains 
are  taken  to  have  it  understood  that  this  treaty  preserves 
unimpaired  something  which  is  called  the  general  principle 
of  neutralization. 

"Mr.  Hay,  in  transmitting  the  Hay-Pauncefote  treaty 
to  the  President,  writes: 

I  submit  for  your  consideration  *  *  *  a  convention 
*  *  *  to  remove  any  objection  which  may  arise  out  of 
the  *  *  *  Clayton-Bulwer  treaty  *  *  *  without  im- 
pairing the  "general  principle"  of  neutrahzation  estabUshed 
in  Article  VIII  of  that  convention. 


Legal   and   Moral   Affpecis  101 

"President  Roosevelt,  in  transmitting  the  treaty  to 

the  Senate,  says: 

I  transmit,  for  the  advice  and  consent  of  the  Senate  to  its 
ratification,  a  convention  signed  November  18,  1901.  *  *  * 
to  remove  any  objection  which  may  arise  out  of  the  convention 
of  April  19,  1850,  *  *  *  to  the  construction  of  such  canal 
under  the  auspices  of  the  Government  of  the  United  States 
without  impairing  the  '' general  principle"  of  neutralization 
established  in  Article  VIII  of  that  convention. 

"That  feature  of  the  Hay-Pauncefote  treaty  is  dwelt 
upon  and  made  extraordinarily  prominent,  and  there  is 
a  manifest  feeling  that  the  Senate  ought  not  to  lose  sight 
of  it  in  considering  whether  it  shall  advise  the  ratification 

of  the  treaty. 

*         *         * 

''The  only  two  things  in  Article  VIII  are  the  equality 
of  service  and  of  charge  between  the  vessels  of  the  United 
States  and  those  of  Great  Britain  and  the  extension  of  that 
to  other  countries  that  come  in  and  the  obligation  of  protec- 
tion. The  great  object  of  the  negotiation  of  the  Hay-Paunce- 
fote treaty  was  to  take  over  to  the  United  States  alone  the 
duty  and  the  right  of  protection.  That  2vas  the  difference 
between  the  Hay-Pauncefote  treaty  and  the  Clayton-Bulwer 
treaty — that  Great  Britain  was  to  surrender  the  right  of 
protection,  to  be  relived  from  the  duty  of  protection,  and  no 
other  countries  ivere  to  be  permitted  to  come  in  and  exercise 
the  right  of  protection.  The  United  States  was  to  put  itself 
on  the  platform  that  Blaine  laid  down  in  1881  «.s'  the  sole 
protector  of  the  canal.  What,  then,  was  there  to  be  preserved 
unimpaired  in  the  eighth  article  of  the  Clayton-Bulwer  treaty? 
Nothing  except  the  basis  of  equality,  equality  between  the 
United  States  and  Great  Britain,  equality  measured  by  the 


102  The  Panama   Tolls  Controversy 

treatment  of  the  nationals  of  one  country  for  the  nationals  of 
the  other.    Nothing  else  was  left  to  be  preserved  unimpaired. 

*         *         * 

"Mr.  Hay,  in  his  letter  to  Senator  Cullom  at  the  time 
the  treaty  was  under  consideration  by  the  Senate,  says: 
He  (the  President)  not  only  was  willing  but  earnestly  de- 
sired that  the  "general  principle"  of  neutralization  referred  to  in 
the  preamble  of  this  treaty  and  in  the  eighth  article  of  the 
Clayton-Bulwer  treaty  should  be  perpetually  applied  to  this 
canal.  This,  in  fact,  had  always  been  insisted  upon  by  the 
United  States. 

"There  was  no  change  in  policy. 
He  recognized  the  entire  justice  and  propriety  of  the  de- 
mand of  Great  Britain  that  if  she  was  asked  to  surrender  the 
material  interest  secured  by  the  first  article  of  that  treaty,  which 
might  result  at  some  indefinite  future  time  in  a  change  of  sov- 
ereignty in  the  territory  traversed  by  the  canal,  the  "general 
principle"  of  neutralization  as  appUed  to  the  canal  should  be 
absolutely  secured. 

"Whatever  else  the  Hay-Pauncefote  treaty  means,  it 
means  to  secure  absolutely  the  general  principle  of  neutraliza- 
tion contained  in  the  eighth  article  of  the  Clayton-Bulwer 
treaty,  which  was,  according  to  the  understanding  of  the 
\  makers  of  the  Hay-Pauncefote  treaty,  the  absolute  equality 
of  the  ships,  the  citizens  and  the  subjects  of  all  nations  with 
the  ships  and  the  citizens  of  the  United  States  and  of  Great 
Britain;  and  we  are  not  at  liberty  to  spell  out  any  different 
meaning  of  the  Hay-Pauncefote  treaty. 
*         *         * 

"The    third    article    of  the  Hay-Pauncefote    treaty 

provides: 

The  United  States  adopts,  as  the  basis  of  the  neutralization 
of  such  ship  canal,  the  following  rules,  substantially  as  embodied 


Legal  and   Moral   Aspects  103 

in  the  convention  of  Constantinople,  signed  the  twenty-eighth 
of  October,  188S,  for  the  free  navigation  of  the  Suez  Canal. 

"Article  XII  of  the  Suez  Canal  convention  provides 
that  dues  are  to  be  levied  without  exception  or  favor  upon 
all  vessels  under  like  conditions. 

"That  was  a  fundamental  basis  under  which  the  Suez 
Canal  was  to  be  operated.    The  convention  proceeds: 

The  Suez  Maritime  Canal  shall  always  be  free  and  open, 
in  time  of  war  as  in  time  of  peace,  to  every  vessel  of  commerce 
or  of  war,  without  distinction  of  flag. 
*  *  * 

"This  convention  which  makes  that  declaration  of 
absolute  and  universal  equality  of  tolls  a  basis  of  its  agree- 
ment was  made  after  Great  Britain  had  become  the  chief 
owner  and  arbiter  of  the  canal.  Now,  I  come  back  to  the 
Hay-Pauncefote  treaty.    Article  III: 

The  United  States  adopts  as  the  basis  of  the  neutralization 
of  such  ship  canal  the  following  rules,  substantially  as  embodied 
in  the  convention  of  Constantinople,  etc. : 

1.  The  canal  shall  be  free  and  open  to  the  vessels  of  com- 
merce and  of  war  of  all  nations  observing  the  rules  on  terms  of 
entire  equality. 

"An  'entire  equality'  substantially  as  embodied  in  the 
Suez  convention.  You  are  bound  to  say  that  the  equality 
was  substantially  the  same.  When  these  negotiators  at 
that  very  instant  were  appealing  to  the  Suez  convention 
and  declaring  the  treaty  they  were  making  was  substan- 
tially the  same  in  the  rule  of  equality  which  it  prescribed, 
when  they  were  declaring  that  what  they  were  doing  was 
substantially  like  what  the  Suez  convention  did — you  are 
not  at  liberty  to  say  that  at  that  very  instant  they  meant 
something  entirely  different.     If  you  do]^that,  you^say 


104  The  Panama  Tolls  Controversy 

they  were  dishonest,  they  were  disingenuous,  they  were 
deceiving  Great  Britain. 

"Ah,  the  worst  thing  about  it  is  that  our  Government 
has  said  from  generation  to  generation  it  was  going  to 
treat  all  the  world  alike  in  whatever  it  did  about  this  canal; 
that  the  makers  of  our  treaty  declared  that  they  were  pre- 
serving unimpaired  the  equality  established  in  the  eighth 
article  of  the  Clayton-Bulwer  treaty;  that  the  makers  of 
our  treaty  declared  that  the  provision  for  equality  was  sub- 
stantially the  same  as  that  in  the  Suez  treaty;  that  that 
was  the  uniform,  the  unvarying  attitude  of  the  United  States 
in  every  step  which  we  took  to  acquire  title  to  the  Canal  Zone 
and  to  get  the  unrestricted  right  to  own  and  operate  the  canal; 
and  not  until  after  we  got  it,  not  until  after  we  were  secure, 
did  any  American  ever  broach  the  idea  that  ive  were  to  use 
the  canal  for  selfish  advantage  commercially;  that  to  the 
political  control,  to  the  military  control,  to  the  power  of 
ownership  and  regulation  and  management  we  were  to 
add  a  discrimination  against  all  the  rest  of  the  world  for 
the  purpose  of  enabling  our  merchant  ships  to  outdo  them 
in  competition." 

We  will  now  use  excerpts  from  an  able  speech  by 
Senator  Burton: 

"OUR  DEMANDS  IN  RELATION  TO  CANADIAN  WATER- 
WAYS IN  1888  TO  1892. 

*  *  * 

"The  Canadian  Government  in  council  had  in 
substance  decreed  that  while  the  tolls  on  cargoes  carried 
through  the  Welland  Canal  should  be  twenty  cents  per 
ton  on  eastbound  freight,  yet  if  the  boat  went  as  far  as 


Legal   and   Moral   Aspects  105 

Montreal  there  should  be  a  rebate  of  eighteen  cents  a  ton, 
leaving  the  net  toll  only  two  cents.  This  gave  a  prefer- 
ence to  the  port  of  Montreal  as  compared  with  the  ports 
of  the  United  States  on  Lake  Ontario,  the  St.  Lawrence 
River,  and,  in  fact,  upon  the  north  Atlantic  seaboard. 
Its  manifest  object  was  to  increase  the  importance  of 
Montreal  as  a  port  for  the  export  of  grain  and  other 
commodities. 

*         *         * 

"A  resolution  by  unanimous  vote  of  Congress  author- 
ized the  President  to  issue  a  proclamation  in  retaliation; 
also  the  proclamation  in  retaliation  of  August  18,  1892. 
This  action  led  to  a  revocation  of  the  regulation  of  the 
Canadian  Government  by  order  of  the  council,  so  that 
equal  privileges  were  afforded  to  the  ships  and  commerce 
of  both  nations. 

"The  distinct  assertion  by  all  of  our  statesmen  who 
took  part  in  this  controversy  or  declared  themselves 
upon  the  subject  was  that  by  the  treaty  of  1871  equaHty 
of  treatment  was  secured  not  only  for  our  shipping, 
but  for  our  citizens,  that  regard  must  be  had  for  the  routes 
of  transportation  to  prevent  discrimination  against  the 
United  States  in  trade.  But  it  should  be  very  carefully 
noted  that  the  treaty  of  1871  did  not  contain  so  strong 
language  as  the  Hay-Pauncefote  of  1901.  Indeed,  it  is 
not  only  plausible  but  extremely  probable  that  the  lan- 
guage of  the  treaty  of  1871  was  in  mind  when  that  of  1901 
was  drawn,  and  that  the  object  was  to  secure  equality 
beyond  the  possibility  of  any  ambiguity.  The  language 
of  the  treaty  of  1871  is: 

The  Government  of  Her  Britannic  Majesty  engage  lo  urge 


106  The  Panama   Tolls  Controversy 

upon  the  Government  of  the  Dominion  of  Canada  to  secure  to 
the  citizens  of  the  United  States  the  use  of  the  Welland,  St. 
Lawrence  and  other  canals  in  the  Dominion  on  terms  of  equality 
with  the  inhabitants  of  the  Dominion. 

"The  language  of  the  Hay-Pauncefote  treaty  is: 

The  canal  shall  he  free  and  open  to  the  vessels  of  commerce 
and  of  war  of  all  nations  observing  these  rules  on  terms  of 
entire  equality,  so  that  there  shall  be  no  discrimination  against 
any  such  nation,  or  its  citiiens  or  subjects,  in  respect  of  the  con- 
ditions or  charges  of  traffic,  or  otherun.se. 

"There  is  no  question  of  territory  involved  in  Cana- 
dian canals,  either  the  Welland  or  those  below  Lake 
Ontario  beside  the  rapids  along  the  St.  Lawrence  River. 
They  are  all  within  the  Dominion  of  Canada.  It  was  not 
necessary  to  acquire  the  land  through  which  they  pass 
to  build  a  canal  as  'a  trust  for  the  world.'  The  argument 
in  favor  of  the  right  of  exclusion  is,  we  must  admit,  much 
stronger  than  it  is  in  the  case  of  the  Panama  Canal;  yet 
when  a  discrimination  in  tolls,  which  it  was  alleged  was 
not  altogether  against  our  ships,  was  attempted,  we 
demanded  that  it  should  be  done  away  with,  because  it 
discriminated  against  our  citizens  and  diverted  trade 
and  transportation  which  naturally  belonged  to  our  own 
country  in  another  direction.  Can  we  afford  to  assert 
the  principle  of  equality  in  the  use  of  channels  when  it 
benefits  us  and  our  trade,  and  at  the  same  time  establish 
another  and   entirely  opposite  rule  when   the  canal   or 

route  belongs  to  us.^ 

*         *         * 

"The  slight  attention  given  in  these  debates  to  our 
demand  from  1888  to  1892  for  equal  privileges  in  the 
Welland  Canal  and  other  Canadian  channels  is  hardly 


Legal   and   Moral   Aspectfi  107 

fair  to  those  who  advocate  the  repeal  of  this  exemption. 
During  the  debates  in  July  and  August  of  lOl'-^  the  de- 
mand was  made  that  the  supporters  of  the  House  bill 
should  reconcile  their  position  with  the  attitude  of  the 
United  States  on  this  question  during  the  administrations 
of  President  Cleveland  and  President  Harrison.  I  do  not 
recall  that  any  reply  was  made  to  that  challenge  of  1912 
for  a  consistent  explanation  of  our  course  in  1888  to  1802. 
But  now,  after  the  lapse  of  two  years,  the  explanation 
is  offered  that  neither  Canada,  nor  Great  Britain  acting 
for  her,  ever  conceded  that  they  were  wrong;  but  that 
to  the  last  they  maintained  the  correctness  of  their 
position  and  yielded  merely  as  a  matter  of  expediency. 
But  does  even  that  afford  one  particle  of  justification 
for  us  to  insist  upon  this  preference? 

"We  made  an  insistent  demand,  not  merely  by  dip- 
lomatic notes,  but  by  action  of  Congress  and  by  a  retalia- 
tory proclamation  expressing  our  interpretation  of  the 
principles  involved  in  the  treaty  relating  to  the  Welland 
Canal  and  asserting  the  observance  of  our  traditional 
policy.  The  action  taken  then  was  in  entire  harmony 
with  declarations  theretofore  made  in  regard  to  the 
proposed  Isthmian  Canal,  and  our  demands  in  regard 
to  other  waterways  in  foreign  countries  extending  over 
one  hundred  years.  It  must  be  conceded  that  the  posi- 
tion taken  by  the  act  of  1912  was  squarely  in  contradic- 
tion to  that  of  1892. 

"Can  we  now,  under  changed  conditions,  and  when 
we  will  he  benefited  by  observing  a  different  rule,  afford 
to  declare  that  our  deliberate  action  then  taken  was  wrong? 
Was  there  one  law  of  honor  and  patriotism  in  1892  and 


108  The  Panama  Tolls  Controversy 

another  in  1912?  Does  it  require  only  twenty  years  to 
change  the  law  of  fairness  between  nations? 

"*  *  *  It  has  been  maintained  in  this  discussion 
that  the  Panama  route  is  a  national  waterway,  as  it  is 
located  upon  territory  owned  by  the  United  States, 
and  thus  within  its  sole  jurisdiction.  Indeed,  the  very 
extreme  statement  has  been  made  that  we  could  not 
respect  the  suggestion  of  another  Government  to  make 
all  tolls  equal,  because  it  would  involve  an  abandonment 
of  sovereignty.     *     *     * 

"A  strip  ten  miles  in  width  was  granted  for  its  con- 
struction, but  this  was  not  a  territorial  acquisition.  If 
so,  it  would  have  been  absolutely  contrary  to  our  settled 
policy  with  reference  to  the  republics  to  the  south  of  us. 
For  this  strip  we  pay  an  annual  rental  of  $250,000,  which 
is  quite  inconsistent  with  a  fee-simple  title.  A  width  of 
ten  miles  was  regarded  as  necessary  for  the  convenient 
construction  and  operation  of  the  canal.  Material  was 
obtained  from  this  area  or  zone  in  the  work  that  was 
done.  Also  material  was  deposited  upon  it.  Provision 
was  made  in  the  treaty  for  going  outside  the  zone  on  pay- 
ment of  proper  compensation,  if  necessary  for  the  con- 
struction of  the  canal.  It  was  deemed  desirable  that  the 
land  obtained  be  permanently  held  for  the  habitation  of 
those  engaged  in  the  operation  of  the  canal  and  for  sani- 
tary and  police  control  in  its  immediate  locality.  Had  the 
mere  ground  through  which  the  canal  is  excavated  been 
obtained,  it  would  have  been  easy  for  marauders  to 
approach  it,  and  the  safeguarding  of  the  health  of  the 
employees  would  have  been  difiBcult.  The  language  of 
the  treaty  itself  expresses  in  the  clearest  terms  that  the 


Legal  and   Moral   Aspecf.s  109 

grant  of  land  in  Panama  is  in  trust  for  a  certain  purpose 
and  not  for  territory  to  be  incorporated  in  the  United 
States  as  a  part  of  its  general  domain. 

"As  compared  with  other  portions  of  the  United 
States  the  distinctions  in  the  control  exercised  over  this 
strip  are  very  marked.  There  is  no  legislative  body. 
There  is  no  provision  for  elections.  A  governor  is  ap- 
pointed by  the  President.  In  the  express  language  of 
the  statute,  the  Canal  Zone  'is  to  be  held,  treated,  and 
governed  as  an  adjunct  of  such  Panama  Canal.'  The 
customs  laws  of  the  United  States  are  not  applicable 
there,  nor  have  the  inhabitants  of  this  strip  the  right  to 
send  their  merchandise  into  the  United  States  in  the  man- 
ner granted  to  the  people  of  our  country.  Imports  from 
the  Canal  Zone  pay  duties  at  our  customhouses  in  the  same 
manner  as  imports  from  a  foreign  country.  Imports  into 
the  Canal  Zone  are  not  subject  to  the  duties  imposed  by 
our  laws.  The  War  Department  has  assumed  the  au- 
thority of  fixing  customs  regulations  without  any  refer- 
ence to  Congress  whatever.  The  canal,  instead  of  being 
an  artery  of  commerce,  supplying  a  large  adjacent  terri- 
tory, such  as  is  the  case  with  the  great  rivers  or  water- 
ways of  the  United  States,  is  limited  to  furnishing  what  is 
needed  for  those  who  operate  the  canal  and  to  the  promo- 
tion of  its  traffic.  Whatever  trans-shipment  there  may  be, 
whatever  coaling  or  supply  stations  may  be  established, 
are  but  incident  to  the  waterway  between  the  oceans, 
and  are  provided  to  facilitate  traffic  through  the  canal. 
The  most  important  of  all,  however,  is  the  fact  that  this 
waterway  is  a  mere  connecting  link  between  the  two 
oceans,  less  than  fifty  miles  in  length,  and  is  constructed 


110  The  Panama  Tolls  Controversy 

as  a  part  of  maritime  routes  of  great  length  providing  a 
waterway  to  aid  the  means  of  communication  between 
nations,  many  of  which  are  remote  from  the  canal  and 
are  located  upon  seas  or  oceans. 

"Second.  It  has  been  maintained  that  there  is  a 
marked  distinction  between  natural  and  artificial  water- 
ways in  the  degree  of  control  which  may  be  exercised 
over  them  by  the  countries  through  which  they  pass. 

"The  more  recent  declarations  of  publicists  and  inter- 
national lawyers,  however,  all  favor  the  idea  that  artificial 
canals  connecting  great  bodies  of  waters  are  international 
waterways.  This  principle  was  asserted  in  the  most 
unequivocal  language  in  the  convention  relating  to  the 
Suez  Canal  of  1888.  The  duty  of  a  country  owning  the 
territory  through  which  a  canal  may  be  constructed  to 
afford  opportunity  for  its  construction  was  maintained 
in  the  most  strenuous  manner  by  President  Roosevelt  in 
his  action  with  reference  to  Colombia. 

"There  is  no  clearer  statement  of  the  American  view 
on  the  subject  than  that  contained  in  a  letter  from  the 
Hon.  Lewis  Cass,  our  Secretary  of  State  under  President 
Buchanan,  to  Mr.  Lamar,  our  minister  to  the  Central 
American  States,  on  July  25,  1858.  He  wrote,  in  referring 
to  the  country  or  countries  through  which  a  canal  might 
be  constructed,  the  following: 

Sovereignty  has  its  duties  as  well  as  its  rights,  and  none  of  these 
local  governments  *  *  *  would  be  permitted,  in  a  spirit 
of  eastern  isolation,  to  close  these  gates  of  intercom-se  on  the 
great  highways  of  the  world  and  justify  the  act  by  the  preten- 
sion that  these  avenues  of  trade  and  travel  belong  to  them,  and 
that  they  choose  to  shut  them  or,  what  is  almost  equivalent,  to 
encumber  them  with  such  unjust  regulations  as  would  prevent 
their  general  use. 


Legal   and   Moral    Aspect.s  1 1 1 

"We  can  reach  no  conclusion  except  that  a  canal  con- 
structed like  the  Panama,  under  a  concession,  the  aim 
and  object  of  which  is  merely  to  provide  a  connecting 
waterway,  especially  in  view  of  the  language  of  the  Hay- 
Pauncefote  treaty,  is  to  be  considered  as  an  international 
watercourse  and  subject  to  the  rules  pertaining  to  natural 
straits.  There  is,  of  course  an  exception  to  this,  so  far 
as  regards  the  necessity  of  adopting  necessary  regulations 
to  protect  against  hostile  attack,  the  necessity  of  adopting 
proper  regulations  to  insure  the  safety  of  boats  in  passing, 
to  provide  against  injury  to  locks  and  other  constructions, 
to  police  the  canal  and  enforce  sanitary  regulations. 
Again,  the  position  of  an  artificial  waterway  is  excep- 
tional in  that  the  cost  of  construction  allows  the  imposition 
of  tolls  as  a  compensation  for  the  expense  of  the  improve- 
ment, though  in  many  instances  the  improvement  of 
natural  channels  so  as  to  make  them  readily  available  for 
navigation  is  very  large,  and,  in  kind,  the  same  as  the  build- 
ing of  artificial  waterways.  Indeed,  it  is  often  a  question 
over  a  given  stretch  of  a  river  whether  the  most  feasible 
method  to  secure  navigation  is  by  improving  the  main 
stream  or  by  a  lateral  canal.  In  modern  times  the  de- 
mand is  that  navigation  have  free  scope,  without  inter- 
ruption from  pirates,  from  payment  of  tribute,  or  from 
discrimination.  As  has  been  pointed  out,  there  is  no 
nation  which  has  been  quite  so  insistent  in  this  princii)le 
as  our  own.  The  tendency  of  recent  years  in  the  making 
of  treaties  and  agreements  is  altogether  against  discrim- 
ination in  the  use  of  artificial  waterways.  It  should 
again  be  said  that  our  own  policy,  as  exemplified  in  nego- 
tiations with  Canada,  shows  that  we  have  maintained 


11^  The  Panama  Tolls  Controversy 

the  principle  that  when  a  canal  is  a  connecting  link  in 
a  longer  route  afforded  by  rivers  or  by  sea,  it  must  be 
open  on  equal  terms  to  all.  Every  declaration  made 
upon  this  subject  in  the  earlier  years  ivhen  negotiations  1 
were  under  way  for  an  Isthmian  canal  would  conde7nn\ 
in  the  most  decisive  language  any  attempt  on  our  part  toj 
discriminate  in  our  favor  in  any  canal  connecting  the  two* 

oceans. 

*         *         * 

"The  treaties  pertaining  to  a  proposed  Isthmian 
canal  are  especially  significant.  In  that  of  1846  with  New 
Granada  there  are  two  provisions.  Article  III  contains 
the  usual  clause  exempting  the  coastwise  trade  of  either 
country.  Article  XXXV,  which  has  to  do  with  the  ports 
of  the  Isthmus  of  Panama  or  any  road  or  canal  across  the 
Isthmus  that  may  be  made  by  the  Government  of  New 
Granada,  or  by  the  authority  of  the  same,  provides  that 
there  shall  be  no  other  tolls  or  charges  levied  or  collected 
from  the  citizens  of  the  United  States  than  are,  under 
like  circumstances,  levied  and  collected  from  the  Grana- 
dian  citizens. 

"The  Cass  treaty  of  November  26,  1857,  with  Nica- 
ragua, known  as  the  Cass-Yrisarri  treaty,  in  Article  II 
reserves  the  coastwise  trade;  Article  XIV  grants  transit 
on  terms  of  equality  to  the  Atlantic  and  Pacific,  and 
contains  the  provision  that  no  higher  charges  or  tolls  shall 
be  imposed  on  the  conveyance  or  transit  of  persons  or 
property  of  citizens  or  subjects  of  the  United  States  or  any 
other  country  across  said  route  of  communication  than 
are  or  may  be  imposed  on  the  persons  or  property  of 
citizens   of   Nicaragua.     This   treaty   was   not   ratified. 


Legal  and  Moral  Aspects  ll.T 

Other  treaties  with  Nicaragua  and  other  countries  make 
unequivocal  reference  to  the  coastwise  trade. 

"In  the  treaty  with  Panama  of  1903  there  is  in  Article 
XIX  an  exemption  of  the  vessels  of  the  Republic  of  Pan- 
ama and  its  troops  and  munitions  of  war  in  such  vessels 
from  the  payment  of  charges  of  any  kind.  This  shows  that 
when  an  exemption  was  intended  it  was  regarded  as  neces- 
sary to  state  it.  The  Frelinghuysen-Zavala  treaty,  made 
in  1884  and  recommended  by  President  Arthur  in  his 
message  of  the  same  year,  but  withdrawn  bj'  President 
Cleveland  in  his  first  annual  message  of  1885,  contained 
this  provision  in  Article  XIV : 

The  tolls  hereinbefore  provided  shall  be  equal  as  to  vessels 
of  the  parties  hereto  and  of  all  nations,  except  that  vessels  en- 
tirely owned  and  commanded  by  citizens  of  either  one  of  the  par- 
ties to  this  convention  and  engaged  in  its  coasting  may  be  favored. 

"Thus  all  of  these  treaties — that  with  New  Granada, 
the  proposed  agreements  with  Nicaragua,  and  the  treaty 
with  Panama — show  that  in  all  our  negotiations  pertain- 
ing to  an  Isthmian  canal  when  it  was  intended  to  exempt 
coastwise  shipping  or  to  grant  any  preferences  it  was 
specifically  so  stated. 

"Now,  the  Hay-Pauncefote  treaty  of  1901  contained 
no  exemption  of  coastwise  shipping,  but,  on  the  contrary, 
the  very  strongest  language  to  express  entire  equality. 

"Is  it  to  be  believed  that  when,  through  a  series  of 
years  in  practically  all  countries  near  to  the  proposed 
canal,  coastwise  shipping  was  exempt  from  the  provisions 
of  the  treaties  in  the  most  definite  language  it  could  have 
been  intended  to  claim  exemption  or  preference  for  our 
own  coastwise  shipping  in  this  canal,  built  on  soil  acquired 


114  The  Panama   Tolls  Controversy 

from  a  foreign  country  and  connecting  the  two  great  oceans 
of  the  world,  without  any  language  whatever  on  the  sub- 
ject? If  it  was  intended  to  exempt  our  coastwise  shipping, 
why  did  we  not  say  so?  This,  too,  in  the  face  of  our  own 
Hraditional  policy'  asserted  against  Canada  less  than  ten 
years  before,  and  asserted  contemporaneously,  at  least  in 
principle,  in  negotiations  with  the  nations  having  spheres 
of  influence  in  the  Chinese  Empire. 
*         *         * 

"In  opposing  this  bill  for  repeal  nothing  has  been 
more  frequent  than  an  appeal  to  patriotism  and  to  national 
pride.  Any  such  appeal  must  necessarily  be  received  with 
a  responsive  spirit,  and  if  made  with  earnestness  it  stirs 
the  heart.  But  patriotism  does  not  mean  that  we  shall  dis- 
regard treaty  obligations  or  swerve  from  policies  which 
have  been  maintained  with  persistency  and  zeal  through 
all  our  national  life.  It  is  our  duty  to  maintain  a  scrupu- 
lous regard  for  national  faith  and  to  follow  the  rules  which 
we  have  laid  down  for  ourselves  as  well  as  for  all  other 
nations.  To  be  consistent  and  to  be  fair  to  all  the  world, 
that  is  patriotism.  If  we  retrace  our  steps  from  the 
ennobling  record  which  has  characterized  us  for  more 
than  one  hundred  years,  let  us  beware  lest  the  most 
inspiring  notes  of  patriotism,  though  uttered  with  the 
tongues  of  men  and  of  angels,  may  become  as  sounding 
brass  and  a  tinkling  cymbal." 

SENATOR  ROOT  ON  THE  SOVEREIGNTY  OF  THE 

CANAL  ZONE 
"Well,  asserting  that  we  were  acting  for  the  common 
benefit  of  mankind,  willing  to  accept  no  preferential  right 


Legal  and   Moral   Aspects  115 

of  our  own,  just  as  we  asserted  it  to  secure  the  Clayton- 
Bulwer  treaty,  just  as  we  asserted  it  to  secure  the  Hay- 
Pauncefote  treaty,  when  we  had  recognized  the  Republic 
of  Panama,  we  made  a  treaty  with  lier  on  the  eighteenth 
of  November,  1903.  I  ask  your  attention  now  to  the  pro- 
visions of  that  treaty.  In  that  treaty  both  Panama  and 
the  United  States  recognize  the  fact  that  the  United 
States  was  acting,  not  for  its  own  special  and  selfish 
interest,  but  in  the  interest  of  mankind. 

"The  suggestion  has  been  made  that  we  are  relieved 
from  the  obligations  of  our  treaties  with  Great  Britain 
because  the  Canal  Zone  is  our  territory.  It  is  said  that, 
because  it  has  become  ours,  we  are  entitled  to  build  the 
canal  on  our  own  territory  and  do  what  we  please  with  it. 
Nothing  can  be  further  from  the  fact.  It  is  not  our  terri- 
tory, except  in  trust.  Article  II  of  the  treaty  with  Panama 
provides : 

The  Republic  of  Panama  grants  to  the  United  States  in  per- 
petuity the  use,  occupation  and  control  of  a  zone  of  land  and 
land  under  water  for  the  construction,  maintenance,  operation, 
sanitation  and  protection  of  said  canal — 

"And  for  no  other  purpose — 
of  the  width  of  ten  miles  extending  to  the  distance  of  five  miles 
on  each  side  of  the  center  hne  of  the  route  of  the  canal  to  be 

constructed. 

*  *  * 

The  Republic  of  Panama  further  grants  to  the  United 
States  in  perpetuity  the  use,  occupation  and  control  of  any  other 
lands  and  waters  outside  of  the  zone  above  described  which  may 
be  necessary  and  convenient  for  the  construction,  maintenance, 
operation,  sanitation  and  protection  of  the  said  canal  or  of  any 
auxiliary  canals  or  other  works  necessary  and  convenient  for 
the  construction,  maintenance,  operation,  sanitation  and  pro- 
tection of  the  said  enterprise. 


116  The  Panama   Tolls  Controversy 

"Article  III  provides: 

The  Republic  of  Panama  grants  to  the  United  States  all 
the  rights,  power  and  authority  within  the  zone  mentioned  and 
described  in  Article  II  of  this  agreement — 

"From  which  I  have  just  read — 

and  within  the  limits  of  all  auxiliary  lands  and  waters  men- 
tioned and  described  in  said  Article  II  which  the  United  States 
would  possess  and  exercise  if  it  were  the  sovereign  of  the  terri- 
tory within  which  said  lands  and  waters  are  located  to  the  entire 
exclusion  of  the  exercise  by  the  Republic  of  Panama  of  any  such 
sovereign  rights,  power  or  authority. 

"x\rticle  V  provides: 

The  Republic  of  Panama  grants  to  the  United  States  in 
perpetuity  a  monopoly,  for  the  construction,  maintenance  and 
operation  of  any  system  of  communication  by  means  of  canal 
or  railroad  across  its  territory  between  the  Caribbean  Sea  and  the 
Pacific  Ocean. 

"I  now  read  from  Article  XVIII: 

The  canal,  when  constructed,  and  the  entrances  thereto 
shall  be  neutral  in  perpetuity,  and  shall  be  opened  upon  the  terms 
provided  for  by  Section  1  of  Article  III  of,  and  in  conformity 
with  all  the  stipulations  of,  the  treaty  entered  into  by  the 
Governments  of  the  United  States  and  Great  Britain  on  Novem- 
ber 18,  1901. 

"(So,  far  from  our  being  relieved  of  the  obligations  of 
the  treaty  with  Great  Britain  by  reason  of  the  title  that  we 
have  obtained  to  the  Canal  Zone,  we  have  tahen  that  title  im- 
pressed with  a  solemn  trust.  We  have  taken  it  for  no  purpose 
except  the  construction  and  maintenance  of  a  canal  in  ac- 
cordance with  all  the  stipulations  of  our  treaty  with  Great 
Britain.  We  cannot  be  false  to  those  stipulations  without 
adding  to  the  breach  of  contract  a  breach  of  the  trust  ivhich  we 
have  assumed,  according  to  our  own  declarations,  for  the 
benefit  of  mankind  as  the  mandatory  of  civilization. 


Legal   and   Moral   ^lf<peclx  117 

"In  anticipation  of  the  plainly- to-be-foreseen  con- 
tingency of  our  having  to  acquire  some  kind  of  title  in 
order  to  construct  the  canal,  the  Hay-Pauncefote  treaty 
provided  expressly  in  Article  IV: 

It  is  agreed  that  no  change  of  territorial  sovereignty  or  of 
international  relations  of  the  country  or  countries  traversed  by 
the  before-mentioned  canal  shall  affect  the  general  princijile  of 
neutralization  or  the  obligation  of  the  high  contracting  parties 
under  the  present  treaty. 

"So  you  will  see  that  the  treaty  with  Great  Britain 
expressly  provides  that  its  obligations  shall  continue,  no 
matter  what  title  we  get  to  the  Canal  Zone;  and  the  treaty 
by  which  we  get  the  title  expressly  impresses  upon  it  as  a 
trust  the  obligations  of  the  treaty  with  Great  Britain. 
How  idle  it  is  to  say  that  because  the  Canal  Zone  is  ours 
we  can  do  with  it  what  we  please. 

"In  the  message  which  was  sent  to  Congress  by 
President  Roosevelt  on  the  4th  of  January,  1904,  explain- 
ing the  course  of  this  Government  regarding  the  revolu- 
tion in  Panama  and  the  making  of  the  treaty  by  which 
we  acquired  all  the  title  that  we  have  upon  the  Isthmus, 
President   Roosevelt    said: 

If  ever  a  Government  could  be  said  to  have  received  a  man- 
date from  civilization  to  effect  an  object  the  accomphshment  of 
which  was  demanded  in  the  interest  of  mankind,  the  United 
States  holds  that  position  with  regard  to  the  interoceanic  canal. 

"There  has  been  much  discussion  for  many  years 
among  authorities  upon  international  law  as  to  whether 
artificial  canals  for  the  convenience  of  commerce  did 
not  partake  of  the  character  of  natural  passageways  to 
such  a  degree  that,  by  the  rules  of  international  law, 
equaUty  must  be  observed  in  the  treatment  of  mankind 


118  The  Panama   Tolls  Controversy 

by  the  nation  which  has  possession  and  control.  Many 
very  high  authorities  have  asserted  that  that  rule  applies 
to  the  Panama  Canal  even  without  a  treaty.  We  base 
our  title  upon  the  right  of  mankind  in  the  Isthmus,  treaty 
or  no  treaty.  We  have  long  asserted,  beginning  with  Secre- 
tary Cass,  that  the  nations  of  Central  America  had  no  right 
to  debar  the  world  from  its  right  of  passage  across  the  Isth- 
mus. Upom  that  view  we  base  the  justice  of  our  entire 
action  upon  the  Isthmus  which  resulted  in  our  having  the 
Canal  Zone.  We  could  not  have  taken  it  for  our  selfish 
interest;  we  coxdd  not  have  taken  it  for  the  purpose  of  secur- 
ing an  advantage  to  the  people  of  the  United  States  over 
the  other  peoples  of  the  world;  it  was  only  because  civiliza- 
tion had  its  rights  to  passage  across  the  Isthmus  and  because 
ice  made  ourselves  the  mandatory  of  civilization  to  assert 
those  rights  that  we  are  entitled  to  be  there  at  all.  On  the 
principles  which  underlie  our  action  and  upon  all  the 
declarations  that  we  have  made  for  more  than  half 
a  century,  as  well  as  upon  the  express  and  positive  stipu- 
lations of  our  treaties,  we  are  forbidden  to  say  we  have 
taken  the  custody  of  the  Canal  Zone  to  give  ourselves  any 
right  of  preference  over  the  other  civilized  nations  of  the 
world  beyond  those  rights  which  go  to  the  owner  of  a  canal 
to  have  the  tolls  that  are  charged  for  passage. 

THE  FOLLOWING  EXCERPTS,  TAKEN  FROM  A  SPEECH 
BY  SENATOR  LODGE,  ARE  NOTEWORTHY  BECAUSE  OF 
THEIR  MORAL  APPEAL: 

"Almost  all  the  nations  largely  engaged  in  commerce 
now  pay  either  indirectly  or  specifically  the  tolls  of 
their  vessels  passing  through  the  Suez  Canal.    They  will 


Legal   and   Moral    Afipects  119 

undoubtedly  do  the  same  thing  for  their  vessels  which 

pass  through  the  Panama  Canal.     If  we  choose  to  pay 

the   tolls   of   our   vessels   passing   through    the   Panama 

Canal,  it  is  admitted  by  England  and  by  all  other  nations 

that  we  have  the  right  to  do  so. 

*         *         * 

"If  the  real  purpose  of  our  legislation  is  to  benefit 
our  shipping  and  insure  an  invincible  competition  to  the 
railroads,  whether  foreign  or  domestic,  the  payment 
of  the  tolls  on  American  vessels  by  the  Government  of 
the  United  States  is  our  right  of  way  through  the  treaty 
and  is  admitted  to  be  so  by  all  the  nations  of  the  earth. 
The  steadfast  refusal  to  adopt  this  obvious  and  undis- 
puted method  of  aiding  American  shipping  in  competition 
with  the  transcontinental  roads  raises  the  inevitable 
inference  that  the  primary  object  of  insisting  upon  a  naked 
toll  exemption  is  not  the  benefit  of  American  shipping 
and  the  reduction  of  water  rates,  but  to  achieve  this  result 
in  a  manner  which  shall  demonstrate  our  disregard  for 
the  opinions  and  rights  of  foreign  nations,  and  more 
particularly  for  the  rights  of  England  under  the  Hay- 
Pauncefote  treaty.  Personally,  I  think  it  most  unwise 
to  insist  upon  exempting  our  vessels  from  tolls  with  the 
single  object  of  flouting  the  opinion  and  disregarding  the 
rights  of  other  nations  as  those  nations  understand  their 
rights. 

"I  now  come  to  another  point  which  weighs  very 
strongly  with  me  in  deciding  against  giving  relief  from 
tolls  to  American  ships  by  the  method  employed  by  the 
canal  act.  Whatever  our  opinion  may  be  as  to  the  strict 
legal  interpretation  of  the  rules  governing  the  matter  of 


120  The  Panama   Tolls  Controversy 

tolls  imposed  upon  vessels  passing  through  the  canal, 
we  cannot  and  we  ought  not  to  overlook  the  understand- 
ing of  those  who  negotiated  the  treaty  as  to  the  intent 
and  effect  of  the  rules  which  they  framed.  As  to  the 
nature  of  the  understanding  we  have  direct  testimony. 
Mr.  Henry  White,  who  first  laid  before  the  British  Govern- 
ment the  desire  of  the  United  States  to  enter  into  nego- 
tiations for  the  supersession  of  the  Clayton-Bulwer 
treaty,  has  stated  that  Lord  Salisbury  expressed  to  him 
the  entire  willingness  of  England  to  remove  all  obstacles 
which  the  Clayton-Bulwer  treaty  put  in  the  way  of 
the  construction  of  the  canal,  and  desired  only  to  main- 
tain equality  of  tolls  imposed  upon  all  vessels,  including 
those  of  the  United  States.  Mr.  Choate,  who,  as  I  have 
said,  completed  the  negotiations  which  resulted  in  the 
second  Hay-Pauncefote  treaty,  has  publicly  stated  that 
the  understanding  at  that  time  of  both  parties  was  the 
same  as  that  given  by  Mr.  White.  The  only  other  Ameri- 
can concerned  in  the  actual  negotiation  of  the  treaty 
was  the  late  Mr.  Hay,  at  that  time  Secretary  of  State. 
I  know  that  Mr.  Hay's  view  was  the  same  as  that  of 
Mr.  Choate  and  Mr.  White.  It  is  therefore  clear  on  the 
testimony  of  our  three  negotiators  that  the  negotiations 
as  they  were  begun  and  as  they  were  completed  in  the 
second  Hay-Pauncefote  treaty  proceeded  on  the  clear 
understanding  that  there  was  to  be  no  discrimination  in 
the  tolls  imposed  as  between  the  vessels  of  any  nation, 

including  the  vessels  of  the  United  States. 

*         *         * 

"Whether  we  shall  insist  upon  giving  to  our  ships 
two  or  three  millions  of  dollars  in  a  disputed  way,  is  in 


Legal   and   Moral   Aspects  121 

my  conception,  a  very  small  question  compared  to  the 
larger  issues  which  are  here  involved.  When  the  year 
1909  opened,  the  United  States  occupied  a  higher  and 
stronger  position  among  the  nations  of  the  earth  than 
at  any  period  in  our  history.  Never  before  had  we 
jjossessed  such  an  influence  in  international  affairs,  and 
that  influence  had  been  used  beneficently  and  for  the 
world's  peace  in  two  conspicuous  instances — at  Ports- 
mouth and  at  Algeciras.  Never  before  had  our  relations 
with  the  various  States  of  Central  and  South  America 
been  so  good.  It  seemed  as  if  the  shadow  of  suspicion 
which,  owing  to  our  dominant  and  at  times  domineering 
])ower,  had  darkened  and  chilled  our  relations  with  the 
people  of  Latin  America,  had  at  last  been  lifted.  A  world 
power  we  had  been  for  many  long  years,  but  we  had  at 
last  become  a  world  power  in  the  finer  sense,  a  power 
whose  active  participation  and  beneficent  influence  were 
recognised  and  desired  by  other  nations  in  those  great 
questions  which  concerned  the  welfare  and  happiness 
of  all  mankind.  This  great  position  and  this  commanding 
influence  have  been  largely  lost.  I  have  no  desire  to  open 
uphold  c^uestions  or  to  trace  the  steps  by  which  this  result 
has  come  to  pass,  still  less  to  indulge  in  criticism  or 
censure  upon  anyone.  I  merely  note  the  fact.  I  am  not 
in  the  councils  of  the  President  of  the  United  States,  but 
I  believe  that  during  the  past  year  the  present  position 
of  the  United  States  in  its  foreign  relations  has  become 
very  apparent  to  him,  as  it  has  to  other  responsible  and 
reflecting  men,  and  with  this  appreciation  of  our  present 
position  has  come  the  earnest  wish  to  retrace  some  of 
our  steps,  at  least,  and  to  regain,  so  far  as  possible,  the 


122  The  Panama   Tolls  Controversy 

high  plane  which  we  formerly  occupied.  It  would  be 
an  obvious  impropriety  to  point  out  the  specific  condi- 
tions of  our  present  relations  with  the  various  nations, 
both  in  the  Old  World  and  the  New;  it  is  enough  to  note 
the  fact  that  we  are  regarded  by  other  nations  with  dis- 
trust and  in  some  cases  with  dislike.  Rightly  or  wrongly, 
they  have  come  to  believe  that  we  are  not  to  be  trusted; 
that  we  make  our  international  relations  the  sport  of 
politics  and  treat  them  as  if  they  were  in  no  wise  diflPerent 
from  questions  of  domestic  legislation. 
*         *         * 

"The  President  has  written  the  history  of  his  country, 
and  it  would  be  strange,  indeed,  if  he  did  not  desire  to 
maintain  our  tradition  of  good  faith  and  fair  dealing  with 
the  other  nations  of  the  earth.  It  is  not  well  for  any  coun- 
try, no  matter  how  powerful,  to  be  an  outlaw  among  the 
nations.  Not  so  many  years  ago  there  were  people  in 
England  who  used  to  speak  with  pride  of  her  'splendid 
isolation,'  but  they  soon  found  out  that  while  isolation 
might  be  splendid,  it  was  in  the  highest  degree  undesirable. 
Since  those  days  England  has  been  making  every  effort  to 
escape  from  her  'splendid  isolation,'  as  has  been  conspicu- 
ously shown  by  the  alliance  with  Japan  and  the  entente 
with  France. 

"I  suppose  that  at  this  moment  in  the  midst  of  the 
adroitly  stimulated  passions  raised  against  the  President's 
recommendation  that  we  should  repeal  the  toll-exemption 
it  will  be  thought  very  poor  spirited  and  even  truckling — 
I  believe  that  is  the  accepted  word — to  suggest  that  in 
deciding  this  question  we  should  take  into  consideration 
the  opinions  of  other  nations.     Nevertheless,  I  consider 


Legal  and   Moral   Aspects  12:5 

til  is  a  very  important  element  in  any  decision  wliich  I  may 
reach,  and  I  am  encouraged  to  believe  that  I  am  right  in 
so  thinking,  because  I  have  the  warrant  and  authority  of 
the  author  of  the  Declaration  of  Independence.  When 
Jefferson  framed  that  great  instrument  he  declared  that 
the  impelling  reason  for  making  the  Declaration  was  *h 
decent  respect  to  the  opinions  of  mankind.'  That  decent 
respect  to  the  opinions  of  mankind  ought  never  to  be  for- 
gotten in  the  decision  of  any  question  which  involves  the 
relations  of  our  own  country  with  the  other  nations  of  the 
earth. 

"The  long  delay  in  the  ratification  by  the  Senate  of 
the  treaties  renewing  the  arbitration  treaties  of  1908  pro- 
duced a  widespread  feeling  among  other  nations  that  our 
championship  of  the  principle  of  arbitration  and  our  loud 
boasts  of  our  devotion  to  the  cause  of  peace  were  the  merest 
hypocrisy,  because  we  seemed  ready  to  abandon  the  cause 
of  arbitration  when  it  looked  as  if  our  treaties  might  bring 
us  to  the  arbitration  of  questions  which  we  did  not  desire 
to  have  decided  by  an  impartial  tribunal.  The  President 
renewed  the  arbitration  treaties,  and  finally,  after  a  delay 
which,  as  I  have  said,  aroused  unpleasant  suspicions,  those 
which  have  been  sent  to  the  Senate  have  been  ratified. 
This  was  the  President's  first  step,  as  I  look  at  it,  in  his 
effort  to  restore  the  influence  and  reputation  of  the  United 
States,  which  he  had  found  to  be  impaired.  His  second 
step  is  his  recommendation  of  the  repeal  of  the  toll-exemp- 
tion clause  of  the  canal  act.  I  speak  wholly  without  au- 
thority, but  I  believe  that  he  must  have  thought  that  our 
insistence  upon  a  contested  interpretation  of  a  treaty  and 
upon  a  disputed  method  of  relieving  our  vessels  from  the 


124  The  Panama   Tolls  Controversy 

payment  of  tolls  has  injured  us  in  the  opinion  of  civilized 
mankind,  and  that  he  believes  that  the  object  sought  in 
no  way  justifies  the  results  which  will  necessarily  follow 
in  the  attitude  of  other  nations  toward  us. 

"He  must  be,  I  believe,  satisfied,  as  I  am  satisfied, 
that  other  nations  will  hesitate  long  before  they  will  enter 
upon  treaties  with  a  country  which  insists  on  deciding  all 
disputed  points  in  treaties  in  its  own  favor  by  a  majority 
vote  of  Congress.  It  would  not  surprise  me  to  learn  that 
the  President  is  of  opinion  that  such  disputed  points 
ought  to  be  settled  as  we  have  settled  them  in  the  past, 
with  which,  as  a  historian,  he  is  familiar,  either  by  negotia- 
tion or  by  arbitration  and  not  by  our  own  votes  without 

appeal  and  open  only  to  the  arbitrament  of  the  sword. 

*  *         * 

"We  obtained  by  the  passage  of  the  toll-exemption  ; 
clause  no  legal  rights  which  we  did  not  already  possess; 
we  waive  none  by  its  repeal.  All  we  have  we  retain,  for 
the  law  is  merely  our  own  statute  for  the  regulation  of 
the  terms  upon  which  the  canal  shall  be  used.  The  larger 
question  which  is  raised  by  the  toll-exemption,  however, 
has  a  purely  international  character,  and  that  we  ought 
to  decide,  now  and  in  the  future,  not  on  considerations  of 
pecuniary  profit  or  momentary  political  exigencies,  but  on 
the  broad  grounds  which  I  have  indicated.     We  should 

determine  what  is  right  without  fear  and  without  favor. 

*  *         * 

"For  these  reasons  which  I  have  set  forth,  although 
I  believe  we  have  the  right  to  exempt  our  vessels  from  tolls, 
I  have  come  to  the  conclusion  that  this  clause  in  the  canal 
act,  which  I  have  opposed  from  the  outset,  ought  to  be 


Legal   and   Moral   Aspecis  Ho 

repealed.  *  *  *  j  Wy\^^\^  so  because  foreign  opinion 
is  united  against  us,  while  opinion  in  our  own  country  is 
divided  as  to  the  proper  interpretation  of  the  language 
of  the  treaty,  and  I  am  not  willing  to  have  the  good  faith 
of  the  United  States  impugned  on  account  of  action  taken 
upon  such  a  contested  ground  as  this.  I  think  the  exemp- 
tion clause  should  be  repealed  because  the  understanding 
upon  which  the  treaty  was  made  is  declared  by  all  our 
negotiators  to  have  been  contrary  to  that  which  I  think  a 
strict  legal  interpretation  of  the  terms  of  the  rules  would 
warrant.  Finally,  I  think  it  should  be  repealed  because  a 
decent  respect  for  the  opinions  of  mankind  and  the  high 
position  of  the  United  States  among  the  nations  of  the 
world  demand  it.     *     *     * 

"The  construction  of  the  Panama  Canal  is  one  of 
the  greatest  achievements  of  the  people  of  the  United 
States.  We  owe  a  debt  to  the  French  who  preceded  us  in 
the  attempt  to  cut  the  Isthmus  at  that  point,  and  we  freely 
acknowledge  the  benefit  which  we  have  derived,  not  only 
from  their  surveys  and  their  engineering  but  from  the 
sacrifices  which  they  so  freely  made  in  behalf  of  this  great 
undertaking.  I  sincerely  hope  that  the  bill  proposed  by 
the  Senator  from  Mississippi,  to  erect  a  monument  to 
De  Lesseps  at  the  entrance  to  the  canal,  will  be  passed, 
and  that  that  monument  will  also  commemorate  the  deeds 
of  the  men  who  gave  their  lives  to  the  task  which  their 
country  had  imposed.  I  hope,  too,  that  when  the  canal  is 
opened  we  shall  permit  the  little  boat  named  Louise,  in- 
herited by  us  from  the  French,  to  pass  through  with  the 
first  American  battleship,  and  that  we  shall  then  give  it  to 
France,  so  that  it  may  rest  upon  the  waters  of  the  Seine, 


126  The  Panama  Tolls  Controversy 

a  memorial  to  a  great  work  which  the  people  of  I'rance 
first  attempted  and  also  to  the  long  friendship  of  the  twf) 
nations. 

"But  while  France  made  the  first  effort  and  failed, 
Ave  took  up  the  work  and  carried  it  to  completion.  It  is 
the  greatest  engineering  feat  of  modern  times,  and  the 
triumphant  result  is  due  not  only  to  the  genius  of  our  mili- 
tary engineers  but  to  the  labor  of  the  medical  officers  of  the 
Army,  who  converted  hot-beds  of  pestilence  into  a  region 
as  healthful  as  any  on  the  face  of  the  earth.  Nothing,  to 
my  thinking,  could  be  finer  than  the  work  of  the  great 
army  which  Colonel  Goethals  has  led  to  this  victory  of 
peace,  and  which  has  never  faltered  or  swerved  in  its 
onward  march  through  mountains  and  by  lakes.  In  all 
that  vast  expenditure,  in  all  the  enormous  labors  which 
have  been  begun  and  completed  upon  that  historic  Isthmus 
there  is  no  spot  or  blemish  to  be  found.  Not  only  the  canal 
itself  but  the  manner  in  which  it  has  been  built  are  among 
the  noblest  national  achievements,  which  the  history  of 
the  United  States  will  cherish  and  preserve.  I  trust  that 
all  this  glory  and  that  this  noble  work,  done  not  merely 
for  our  own  profit  but  for  the  benefit  of  the  world,  will  not 
be  disfigured  by  a  desire  to  put  money  into  the  pockets  of  a 
few  American  citizens  in  a  questionable  manner.  I 
should  be  grieved  to  see  this  great  monument  of  American 
genius  and  American  skill  defaced  by  a  sorry  effort  to 
affront  other  nations  when  we  complete  a  vast  work  de- 
signed to  promote  not  trade  alone  but  peace  and  good 
will  among  all  mankind." 

Oscar  S.  Straus  states  from  an  international  stand- 


Legal   and   Moral    Aspects  127 

point  the  unwisdom  of  granting  free  transportation  to  our 
coastwise  shipping. 

"Are  we  now  to  cast  aside  all  of  our  high  purposes 
which  have  been  consecrated  by  uniform  practices  for  the 
past  century  and  a  quarter,  from  the  administration  of 
Washington  to  the  administration  of  Wilson  for  a  paltry 
sum  at  most  of  $2,000,000  annually?  *  *  *  Are  we 
to  sacrifice  the  decent  respect  for  the  opinions  of  mankind 
for  this  miserable  mess  of  pottage?  This  phase  of  the  sub- 
ject I  wish  to  emphasize,  as  the  importance  of  it  impresses 
itself  upon  me  with  greater  force  than  perhaps  it  does  some 
others,  who  have  not  been  charged  with  service  for  the 
country  in  foreign  lands,  and  therefore  perhaps  do  not  ap- 
preciate as  fully  as  they  otherwise  would,  its  international 

aspect  and  relationship. 

*         *         * 

"You  have  before  you  *  *  *  the  understanding 
as  to  the  meaning  of  the  treaty  given  by  our  negotiators, 
Ambassador  Choate  and  Henry  White,  who  are  both  em- 
phatic in  their  statement  that  there  was  no  preference  to 
be  given  to  any  of  our  ships  over  those  of  Great  Britain. 
If  any  doubt  remains  in  our  midst,  for  there  is  no  doubt 
on  the  part  of  other  nations,  let  us  not  leave  with  them  even 
a  suspicion  that  because  we  have  the  power  to  construe 
this  treaty  to  their  disadvantage  we  would  do  them  even 
an  apparent  injustice.  Let  us,  on  the  contrary,  emphasize 
that  our  word  is  as  good  as  our  bond  and  that  our  bond 
is  not  open  to  technical  construction,  or  even  to  quibble, 
and  that  we  will  fulfill  it  not  only  to  the  letter  but  in  accord 
with  a  broad  and  liberal  spirit,  as  was  so  admirably  ex- 
pressed by  Washington  in  his  Farewell  Address: 


128  The  Panama   Tolls  Controversy 

It  will  be  worthy  of  a  free,  enlightened,  and,  at  no  distant 
period,  a  great  nation  to  give  to  mankind  the  magnanimous  and 
too  novel  example  of  a  people  always  guided  by  an  exalted  justice 
and  benevolence. 

"I  have  purposely  avoided  going  over  the  general 
argument  as  to  the  construction  of  the  treaty,  and  have 
tried  to  confine  myself  to  the  international  aspect  of  it. 
I  need  not  impress  upon  your  mind  the  great  value  of  a 
great  reputation  for  fairness,  for  broadness  of  view  on  the 
part  of  a  nation.  We  have  or  did  have  a  tremendous 
influence  in  the  councils  of  nations  upon  all  questions 
affecting  the  international  welfare  of  the  world.  Now,  as 
a  matter  of  policy,  should  we  not  do  everything  to  continue 
that  great  power,  and  in  the  language  of  Sumner  in  his 
Prophetic  Voices  Concerning  America,  that  'the  example 
of  the  United  States  will  be  more  puissant  than  Army  or 
Navy  for  the  conquest  of  the  world.' 

"I  think  there  is  no  doubt  that  the  nations  of  the  world 
feel  that  in  excluding  our  coastwise  ships  from  the  payment 
of  tolls  that  we — putting  it  in  its  mildest  form — are  making 
a  technical  construction  for  our  advantage  of  an  inter- 
national treaty  that  is  of  interest  to  the  whole  world. 

"Now,  as  a  matter  of  policy,  would  it  not  be  wise  in 
consideration  of  the  great  influence  that  we  can  exert  and 
are  exerting  in  the  court  of  nations,  not  to  take  advantage 
of  what  to  them  appears,  and  to  many  of  the  ablest  men 
of  the  Senate  and  House  appears,  as  a  technical  and  narrow 
construction.?  That  appears  to  me  to  be  the  broad  view 
of  the  subject.  I  know  from  personal  experience  that 
many  of  the  leading:  men  feel  that  we,  in  making  this 
construction,  are  technical,  narrow  and  selfish." 


Legal  and  Moral   Aspects  129 

The  following  newspaper  clippings  are  in  line  with 
the  foregoing: 

"It  is  difficult  for  an  American  to  realize  the  false 
position  in  which  we  have  been  placed  as  a  nation  by  the 
enactment  of  two  years  ago,  when  we  legislated  in  favor 
of  freedom  of  American  vessels  engaged  in  the  coastwise 
trade  from  the  payment  of  tolls.  However,  our  own 
selfish  interests  may  prejudice  us  in  our  construction  of 
the  terms  of  the  Hay-Pauncefote  treaty,  the  fact  remains 
that  in  Europe  the  treaty  is  looked  upon  as  guaranteeing 
to  other  nations  the  use  of  the  canal  under  exactly  the 
same  conditions  as  those  which  apply  to  the  United 
States.  Indeed,  this  action  has  won  for  us  the  unpleasant 
reputation  of  being  willing  to  ignore  plain  treaty  stipu- 
lations when  our  interests  so  suggest.  In  short,  tradition, 
consistency  and  national  honor  all  unite  in  demanding 
that  we  take  speedy  action  to  renounce  this  legislation 
of  two  years  ago  and  that  we  at  once  place  all  our  traffic 
through  the  canal  upon  the  same  basis  as  that  of  other 
nations." 

"London,  April  3. — The  Spectator,  commenting  upon 
the  status  of  the  Panama  Canal  tolls  repeal  bill  in  the 
United  States  Congress,  says  in  an  editorial  today: 

The  honor  of  the  United  States  is  now  at  stake  before  the 
whole  world.  We  do  not  think  we  shall  be  charged  with  affecta- 
tion if  we  say  that  the  question  whether  British  ships  are  or  are 
not  to  pay  more  than  their  share  for  the  n{)-keep  of  the  canal  is 
as  nothing  compared  with  the  question  whether  the  United 
States  can  or  cannot  be  counted  upon  to  accept  the  obvious 
meanings  of  treaties  and  scrupulously  to  observe  them. 

If  the  mighty  Anglo-American  race  in  the  United  States, 
which  has  received  the  imprint  of  Anglo-Saxon  character,  allows 
it  to  be  said  that  the  United  States  does  not  respect  treaties,  a 


130  The  Panama   Tolls  Controversy 

crippling  blow  will  have  been  struck  at  the  best  of  all  Anglo- 
Saxon  traditions.  The  value  of  international  relations  would  be 
changed  and  the  world  would  be  different. 

We  will  close  this  line  of  observations  with  appropriate 
comments  by  Charles  Francis  Adams : 

"I  feel  strongly  on  the  subject,  and  also  as  an  Ameri- 
can citizen,  somewhat  humiliated  by  the  turn  discussion 
is  taking.  So  far  as  I  can  see,  it  is  shockingly  low  in  tone; 
quite  worthy,  perhaps,  of  'Little  Jack  Horner,'  but  alto- 
gether unworthy  of  the  occasion. 

"The  keynote  of  the  discussion,  it  strikes  me — as  I 
suggested  to  you  last  evening — should  have  been  Hamil- 
ton's somewhat  famous  remark  that  the  American  people 
must  learn  'to  think  continentally.'  This  was  said  with 
an  eye  to  provincial  conditions  then  (1787)  existing, 
and  impeding  the  attainment  of  nationality.  We  have 
got  beyond  that  now;  and,  in  the  present  case,  it  is  most 
desirable  the  American  people  should  be  made  to  think 
cosmopolitanly.    We  have  attained  a  higher  status. 

"So  it  irritates  and  mortifies  me  to  have  this  tolls 
discussion  conducted,  as  it  is  the  tendency  to  conduct  it, 
on  a  country  crossroads  grocery  level.  I  hear  it  said,  for ' 
instance,  by  those  who,  it  seems  to  me,  should  know 
better,  that  the  Hay-Pauncefote  treaty  was  a  mistake 
and  for  us  a  'bad  bargain,'  but  we  must  'make  the  best 
of  it.'  On  the  other  hand,  I  hear  it  suggested  that  the 
treaty  admits  of  a  police-court  construction,  under  which, 
by  having  recourse  to  a  quibble  and  reading  words  into  it, 
we  would  secure  certain  advantages — as  much,  for  instance, 
as  five  cents,  possibly,  a  head  for  each  inhabitant! 

"I  take  a  wholly  diflferent  view  of  the  matter.     I 


Legal   and    Moral    Atipect.s  LSI 

insist  upon  it  that  the  treaty  is  in  no  way  'a  bad  bargain'; 
it  was,  on  the  contrary,  negotiated  in  a  large  cosmopolitan 
spirit,  and,  dealing  wath  a  world-issue,  it  is  in  every 
respect  right,  sound,  and  as  it  should  be.  The  negotiators 
appreciated  the  fact  that  this  was  a  world  question,  and, 
rising  to  an  equality  with  it,  small  local  interests  and  tem- 
porary advantages  were  eliminated  from  consideration. 
They  so  acted,  and  they  were  right  in  so  acting.  It  was 
a  large,  statesmanlike,  w^o rid- wide,  all-time  view. 

SHOULD  LIVE  UP  TO  SPIRIT 

"In  this  spirit  they  negotiated  a  treaty  in  which  the 
United  States  was  the  principal  factor  and  largest  party 
in  interest.  The  United  States  should  now,  in  my  judg- 
ment, live  up  to  this — not  bargain;  that  is  a  low  huck- 
stering term — but  should  live  up  to  this  international 
pact.  It  is  essentially  cosmopolitan,  and  should  be  dealt 
with  in  a  cosmopolitan  and  not  a  ten-and-six  spirit. 

"That  larger  and  higher  aspiration  dictated  the  terms 
of  a  treaty  under  which  no  nation  was  to  have  any  advan- 
tage over  any  other  nation,  and  the  peoples  of  the  world 
were  to  use  this  international  thoroughfare  on  terras  of 
absolute  equality,  one  with  another.  There  were  to  be 
no  small  preferences.  What  was  law  for  one  was  to  be 
law  for  another.    And  this  was  right! 

"The  enforcement  of  that  law  and  this  pact  was 
then  left  with  the  United  States.  Such  being  the  case, 
we  should,  in  my  judgment,  be  the  very  last  people 
on  earth  to  read  into  the  treaty  what  is  not  plainly  there, 
or  to  claim  under  it  any  exclusive  or  sordid  benefit.  We 
should  say  that  we  propose  to  enforce  the  rule  of  absolute 


132  The  Panama   Tolls  Controversy 

equality  in  the  use  of  the  canal  on  other  nations;  and, 
at  the  outset,  we  would  set  an  example  by  enforcing  it 
upon  ourselves.  Recognizing  the  fact  that  we  are  a 
republic  and  a  great  one,  we  should  treat  with  contempt 
all  huckstering  suggestions.  All  the  time  and  above  all, 
we  should  bear  in  mind  that  this  is  not  a  tradesman  deal, 
to  be  disposed  of  on  a  county  court  level.  Let  it  be  borne 
in  mind  that  in  every  step  now  taken  the  United  States 
is  on  trial;  and,  being  so,  should  show  a  disposition  to 
live,  both  in  letter  and  spirit,  up  to  the  high  standard 
which  influenced  the  negotiators  when  the  treaty  was 
formulated.  Not  a  bargain,  it  should  be  construed  in  no 
pettifogging  or  shop-keeper  spirit.  It  speaks  for  itself — 
a  world  pact! 

"If  therefore,  the  people  of  the  United  States,  repre- 
sented by  Congress,  are  not  now  prepared  to  think  cos- 
mopolitanly  on  this  issue,  they  will  simply  show  to  an 
onlooking  world  that  as  a  republic  they  are  not  equal  to 
the  occasion  which  is  presented.  The  corner-grocery 
spirit  will  have  asserted  mastery.  This,  it  seems  to  me, 
would  be  truly  lamentable;  but  President  Wilson  is  pecu- 
liarly well  situated  to  emphasize  the  larger  point  of  view." 

MANNER  OF  SECURING  TITLE 

President  Roosevelt  said  in  this  message  of  January  4, 
1904,  laying  before  Congress  the  Panama  treaty: 

"The  proper  position  for  the  United  States  to  assumet 
in  reference  to  this  canal,  and  therefore  to  the  Govern-' 
ments  of  the  Isthmus,  had  been  clearly  set  forth  by 
Secretary  Cass  in  1858.  In  my  annual  message  I  have 
already  quoted  what  Secretary  Cass  said;  but  I  repeat 


Legal   and   Moral   Aspects  133 

the  quotation  here,  because  the   principle   it  states   is 
fundamental: 

While  the  rights  of  eovereigntj'^  of  the  States  occupying 
this  region  (Central  America)  should  alwaj's  be  respected,  we 
shall  expect  that  these  rights  be  exercised  in  a  spirit  befitting 
the  occasion  and  the  wants  and  circumstances  that  have  arisen. 
Sovereignty  has  its  duties  as  well  as  its  rights,  and  none  of  these 
local  Governments,  even  if  administered  with  more  regard  to 
the  just  demands  of  other  nations  than  they  have  been,  would  be 
permitted  in  a  spirit  of  eastern  isolation  to  close  the  gates  of 
intercourse  on  the  great  highways  of  the  world  and  justify  the 
act  by  the  pretension  that  these  avenues  of  trade  and  travel 
belong  to  them  and  that  they  choose  to  shut  them,  or,  what  is 
almost  equivalent,  to  encumber  them  with  such  unjust  rela- 
tions as  would  prevent  their  general  use. 

"The  principle  thus  enunciated  by  Secretary  Cass 
was  sound  then  and  it  is  sound  now.  The  United  States 
has  taken  the  position  that  no  other  Government  is  to  build 
the  canal.  In  1889,  when  France  proposed  to  come  to 
the  aid  of  the  French  Panama  Company  by  guaranteeing 
their  bonds,  the  Senate  of  the  United  States  in  executive 
session,  with  only  some  three  votes  dissenting,  passed  a 
resolution,  as  follows : 

That  the  Government  of  the  United  States  will  look  with 
serious  concern  and  disapproval  upon  any  connection  of  any 
European  Government  with  the  construction  or  control  of  any 
ship  canal  across  the  Isthmus  of  Darien  or  across  Central 
America,  and  must  regard  any  such  connection  or  control  as  in- 
jurious to  the  just  rights  and  interests  of  the  United  States  and  a.s 
a  menace  to  their  welfare. 

"Under  the  Hay-Pauncefote  treaty  it  was  explicitly 
provided  that  the  United  States  should  control,  police  and 
protect  the  canal  which  was  to  be  built,  keeping  it  open  for 
vessels  of  all  nations  on  equal  terms.    The  United  States 


134  The  Panama   Tolls  Controversy 

thus  assumed  the  position  of  guarantor  of  the  canal  and 

of  its  peaceful  use  by  all  the  world." 

Recently  ex-President  Roosevelt  is  reported  as  saying: 
"For  four  hundred  years  there  had  been  conversation 

about  the  need  of  the  Panama  Canal.     The  time  for 

further  conversation  had  passed,  the  time  to  translate 

words  into  deeds  had  come. 

*  *         * 

"It  is  only  because  the  then  [my]  administration  acted 
precisely  as  it  did  act  that  we  now  have  the  Panama  Canal. 

"The  interests  of  the  civilized  people  of  the  world 
demanded  the  construction  of  the  canal.  Events  had 
shown  that  it  could  not  be  built  by  a  private  concern. 
We  as  a  nation  would  not  permit  it  to  be  built  by  a  foreign 
Government.    Therefore,  we  were  in  honor  bound  to  build 

it  ourselves. 

*  *         * 

"Panama  declared  her  independence,  her  citizens 
acting  with  absolute  unanimity.  We  promptly  acknowl- 
edged her  independence.  She  forthwith  concluded  with 
us  a  treaty  substantially  like  that  we  had  negotiated  with 
Colombia  for  the  same  sum  of  money.  We  then  imme- 
diately took  the  Canal  Zone  and  began  the  construction 

of  the  canal. 

*  *         * 

"The  case  demanded  immediate  and  decisive  action. 
I  took  this  action.  Taking  the  action  meant  taking  the 
Canal  Zone  and  building  the  canal.  Failure  to  take  the 
action  would  have  meant  that  the  Canal  Zone  would  not 
have  been  taken  and  that  the  canal  would  not  have  been 
built." 


Legal   and   Moral   Aspects  185 

We  took  the  Canal  Zone  under  the  principle  of 
international  eminent  domain.  That  obligates  the  United 
States  to  manage  the  canal  as  a  public  utility.  This  pre- 
cludes free  transportation.  Exemption  of  the  public 
vessels  of  the  Republic  of  Panama  from  the  payment  of 
tolls  is  merely  commuted  rent  for  leasehold  rights.  Ex- 
emption of  the  public  vessels  of  the  United  States  is  in 
consideration  of  service  in  connection  with  protection  and 
maintenance.  Other  traffic  through  the  canal  must  receive 
the  same  treatment.  The  owner  is  entitled  to  collect  in 
revenue  an  amount  sujEcient  to  cover  operating  expenses, 
interest,  reserves  and  sinking  fund.  The  United  States 
need  not  be  out  a  cent  for  the  canal  if  it  will  apply  business 
methods  in  its  management.  This  puts  the  United  States 
in  a  unique  position  to  operate  and  manage  the  canal 
"for  the  benefit  of  mankind  on  equal  terms  to  alV  and  thereby 
justify  the  manner  in  which  it  secured  leasehold  rights  to 
the  Canal  Zone. 

The  United  States  has  expended  hundreds  of  millions 
of  dollars  in  coast  and  harbor  improvements  to  develop 
and  promote  commerce.  There  is  no  direct  return  to  the 
national  treasury  for  the  expenditures  incurred.  The 
entire  benefit  is  indirect — increased  national  prosperity. 

Contrast  this  situation  with  the  one  presented  by 
the  Panama  Canal.  The  expenditures  incurred  for  the 
latter  are  to  be  amortized  through  charges  to  revenue 
from  tolls  and  all  operating  expenses  are  similarly  to  be 
charged  to  revenue.  The  cost  to  the  United  States,  in 
the  long  run,  need  not  be  anything.  It  need  not  cost 
the  United  States  treasury  a  cent  if  the  government  will 
apply  gray  matter  in  the  management  of  the  canal. 


136  The  Panama  Tolls  Controversy 

The  indirect  commercial  benefits  to  the  United  States 
will  be  real  and  substantial.  Note  the  following  from  the 
Evening  Post  (New  York): 

"The  curtailing  of  distances  between  our  Atlantic 
and  Pacific  coasts — our  coastwise  trade — is  so  much  larger 
than  the  saving  in  mileage  from  Europe  or  Africa  to  the 
west  coast  of  the  American  continent  that  even  with 
equal  tolls  our  own  shipping  draws  much  the  larger  gain 
from  the  Canal.  Tolls  exemption  would  tend  to  empha- 
size the  advantage  by  throwing  the  cost  of  canal  main- 
tenance on  the  traffic  that  profits  least. 

"For  the  Panama  CanaLto  be  a  success  and  of  real 
value  to  this  country  it  must  prove  an  economical  route 
for  coast-to-coast  trade  as  well  as  a  cheap  route  for  trade 
between  the  eastern  coast  of  the  United  States  and  the 

western  coast  of  South  America. 

*         *         * 

"For  such  trade  the  Panama  Canal  favors  the 
American  shipper  by  over  55  per  cent.  If  this  country 
cannot  benefit  with  such  a  handicap,  the  Panama  Canal 
must  be  a  failure  so  far  as  the  United  States  is  concerned." 

The  United  States  has  been  granted  a  canal  monop- 
oly in  perpetuity  by  Panama  in  the  territory  over  which 
it  is  sovereign.  The  Nicaragua  treaty  submitted  to  the 
United  States  Senate  for  ratification  secures  the  right 
to  construct  the  Nicaragua  canal  on  payment  of  $3,000,- 
000.  It  is  already  suggested  that  we  secure  similar 
right  to  the  Atrato  route.  In  short,  the  United  States 
aims  at  a  transportation  monopoly  across  the  Isthmus 
connecting  North  and  South  x\merica.     Therefore,  it  is 


Legal   and   Moral    Aspects  1S7 

obligated  to  adopt  the  public  utility  principle  in  its 
management;  that  is,  "for  the  benefit  of  mankind  on  equal 
(eri7is  to  all." 

The  annual  capacity  of  the  Panama  Canalis  80,000- 
000  tons.  Its  maximum  capacity  will  not  be  reached  in 
decades.  Only  nine  per  cent  of  the  operating  revenue 
was  needed  to  defray  operating  expenses  by  the  Suez 
Maritime  Canal  Company  in  1911.  This  shows  that  there 
will  be  opportunity  for  exorbitant  profits  in  the  manage- 
ment of  the  Panama  Canal  after  the  liability  is  extin- 
guished through  a  sinking  fund.  Therefore  it  is  important 
that  the  Hay-Pauncefote  treaty  be  continued  unimpaired 
and  that  it  should  be  given  the  meaning  intended  by 
John  Hay. 

Great  Britain  was  given  to  understand  and  did 
understand  that  the  shipping  of  her  subjects  (nationals) 
through  the  canal  in  the  matter  of  charges  and  condi- 
tions would  receive  the  same  treatment  as  the  shipping 
of  citizens  (nationals)  of  the  United  States.  Thereto 
"we  have  pledged  our  faith  as  a  nation,  and  that  is  the 
beginning  and  the  end  of  all  argument.     *     *     * 

"Our  sole  concern  relates  to  our  own  honor,  and  that 
must  be  preserved  inviolate.  That  it  would  be  sullied 
in  our  own  eyes  and  before  the  world  we  firmly  believe 
a  careful  study  of  all  phases  of  the  subject  *  *  * 
cannot  fail  to  convince  every  honest  mind.  To  all  good 
citizens,  then,  we  say,  unhesitatingly: 

"Remember  the  admonition  of  Washington  to  'ob- 
serve good  faith  and  justice  toward  all  nations'  and  stand 
by  President  Wilson  in  his  courageous  determination  to 


138  The  Panama   Tolls  Controversy 

'redeem  every  obligation  without  quibble  or  hesitation'; 
stand  by  him,  not  necessarily  because  he  is  President, 
but  because  he  is  right." — Harvey. 

The  following  newspaper  clipping  is  apropos : 
"The  question  for  Congress  to  consider  is,  can  we 
afford  to  make  our  policy  as  changeable  as  the  figures 
of  a  kaleidoscope  whenever  it  happens  to  suit  our  own 
interests?  When  we  have  throughout  our  entire  history 
proclaimed  to  the  world  a  policy  founded  on  neutrality 
and  equality,  can  we  sanction  any  measure  which  favors 
equality  when  it  helps  us  and  utterly  ignore  and  repudiate 
it  when  it  may  not  prove  to  our  interest?" 

We  will  close  this  chapter  with  the  following  excerpts 
from  Senator  Root's  memorable  speeches  in  favor  of  the 
repeal  of  the  tolls-exemption  clause  of  the  Panama  Canal 
act: 

"It  is  no  petty  question  with  England  about  tolls. 
This  is  a  question  whether  the  United  States,  put  on  its 
honor  with  the  world,  is  going  to  make  good  the  public 
declarations  that  reach  back  beyond  our  lives,  whether 
the  honor  and  good  faith  of  the  United  States  is  as  good  as 
its  bond,  whether  acute  and  subtle  reasoning  is  to  be  ap- 
plied to  the  terms  of  a  treaty  with  England  to  destroy 
the  just  expectations  of  the  world  upon  more  than  half  a 
century  of  American  professions,  upon  which  we  give  no 
contract  right,  and  there  is  no  security  but  honor  and  good 
faith.  *         *         * 

"/  knew  something  about  this  treaty.  I  knew  what  John 
Hay  thought.  I  sat  next  him  in  the  Cabinet  of  President 
McKinley    while    it    was    negotiated,    and    of    President 


Legal   and   Moral    Aspects  IS» 

Roosevelt  when  it  was  signed.  I  was  called  in  with  Senator 
Spooner  to  help  in  the  framing  of  the  Panama  treaty 
which  makes  obedience  to  this  Hay-Pauncefote  treaty  a 
part  of  the  stipulations  under  which  we  get  our  title.  I 
negotiated  the  treaty  with  Colombia  for  the  settlement 
and  the  removal  of  the  cloud  upon  the  title  to  the  Lsthnuis 
of  Panama  and  carried  on  the  negotiations  with  England 
under  which  she  gave  her  assent  to  the  privileges  that  were 
given  to  Colombia  in  that  treaty.  I  have  had  to  have  a 
full  conception  of  what  this  treaty  meant  for  now  nearly 
thirteen  years.  I  know  what  Mr.  Hay  felt  and  what  he 
thought,  and,  *  *  *  j  gpeak  for  all  the  forbears 
that  went  before  me  in  America  and  for  all  that  shall 
come  after  me,  for  the  honor  and  credit  of  our  country, 

and  for  that  alone.    If  we  do  not  guard  it,  who  shall? 

*         *         * 

"Our  democracy  has  assumed  a  great  duty  and  asserts 
a  mighty  power.  I  have  hoped  that  all  diplomacy  would  be 
made  better,  purer,  nobler,  placed  on  a  higher  plane  be- 
cause America  was  a  democracy.  I  believe  it  has  been; 
I  believe  that  during  all  our  history  the  right-thinking, 
the  peace-loving,  the  justice-loving  people  of  America 
have  sweetened  and  ennobled  and  elevated  the  intercourse 
of  nations  with  each  other;  and  I  believe  that  now  is  a 
great  opportunity  for  another  step  forward  in  that  benefi- 
cent and  noble  purpose  for  civilization  that  goes  far  beyond 
and  rises  far  above  the  mere  question  of  tolls  or  a  mere 
question  with  England.  It  is  the  conduct  of  our  Nation 
in  conformity  with  the  highest  principles  of  ethics  and  the 
highest  dictates  of  that  religion  which  aims  to  make  the 
men  of  all  the  races  of  the  earth  brothers  in  the  end." 


Chapter  III 

The  Financial  Aspects  of  Tolls -Exemption 

In  the  proper  consideration  of  this  aspect  of  the 
question,  we  must  determine  what  traffic  through  the  canal 
is  exempt  from  payment  of  tolls  under  existing  treaties. 
The  public  vessels  of  the  United  States  through  the  canal 
are  exempt  from  the  payment  of  tolls  by  understanding 
with  Great  Britain.  Article  XIX  of  the  treaty  with  Pan- 
ama states:  "The  Government  of  the  Republic  of  Panama 
shall  have  the  right  to  transport  over  the  canal  its  vessels 
and  its  troops  and  munitions  of  war  in  such  vessels  at  all 
times  without  paying  charges  of  any  kind."  Great 
Britain  has  conceded  the  right  of  the  United  States  to 
enter  into  a  treaty  with  Colombia  exempting  their  public 
vessels  from  the  payment  of  tolls,  if  thereby  it  will  get  a 
clear  title  to  the  Canal  Zone.  No  other  traffic  through  the 
canal  is  exempt  from  payment  of  tolls  through  treaty 
stipulation.  None  can  be  made  exempt  by  legal  enactment. 

The  Panama  Canal  act  provides: 

Sect.  5.  "That  the  President  is  hereby  authorized  to 
prescribe  and  from  time  to  time  change  the  tolls  that  shall 
be  levied  by  the  Government  of  the  United  States  for 
the  use  of  the  Panama  Canal:  Provided,  That  no  tolls, 
when  prescribed  as  above,  shall  be  changed,  unless  six 
months'   notice  thereof  shall  have  been   given   by  the 

140 


The  Financial   Aspects  141 

President  by  proclamation.  No  tolls  shall  he  levied 
upon  vessels  engaged  in  the  coastwise  trade  of  the  United 
States. 

*         *         * 

"Tolls  may  be  based  upon  gross  or  net  registered  ton- 
nage, displacement  tonnage,  or  otherwise,  and  may  be 
based  on  one  form  of  tonnage  for  warships  and  another 
for  ships  of  commerce.  The  rate  of  tolls  may  be  lower 
upon  vessels  in  ballast  than  upon  vessels  carrying  passen- 
gers or  cargo.  When  based  upon  net  registered  tonnage 
for  ships  of  commerce,  the  tolls  shall  not  exceed  one  dollar 
and  twenty-five  cents  per  net  registered  ton,  nor  be  less, 
other  than  for  vessels  of  the  United  States  and  its  citi- 
zens, than  the  estimated  proportionate  cost  of  the  actual 
maintenance  and  operation  of  the  canal.  If  the  tolls 
shall  not  be  based  upon  net  registered  tonnage,  they  shall 
not  exceed  the  equivalent  of  one  dollar  and  twenty- 
five  cents  per  net  registered  ton  as  nearly  as  the  same  may 
be  determined,  nor  be  less  than  the  equivalent  of  seventy- 
five  cents  per  net  registered  ton.  The  toll  for  each  passen- 
ger shall  not  be  more  than  one  dollar  and  fifty  cents. 
The  President  is  authorized  to  make  and  from  time  to 
time  to  amend  regulations  governing  the  operation  of 
the  Panama  Canal,  and  the  passage  and  control  of  vessels 
through  the  same  or  any  part  thereof,  including  the  locks 
and  approaches  thereto,  and  all  rules  and  regulations 
affecting  pilots  and  pilotage  in  the  canal  or  the  approaches 
thereto  through  the  adjacent  waters." 

The  foregoing  is  construed  by  Senator  Root  as 
follows: 

"The  President   is   authorized   to   impose   tolls  not 


142  The  Panama   Tolls  Controversy 

exceeding  one  dollar  and  twenty-five  cents  per  net  regis- 
tered ton,  except  for  vessels  of  the  United  States  and  its 
citizens,  and  not  less  than  seventy-five  cents  per  net 
registered  ton,  and  is  prohibited  from  imposing  any  tolls 
upon  vessels  engaged  in  the  coastwise  trade  of  the  United 
States.  He  is  required  to  impose  tolls  of  at  least  seventy- 
five  cents  per  net  registered  ton  upon  all  foreign  vessels. 
He  is  authorized  to  impose  no  tolls  upon  any  American 
vessel,  and  is  required  to  impose  no  tolls  upon  American 
vessels  engaged  in  the  coastwise  trade." 

Objections  are  made  by  Sir  Edward  Grey  to  the 
provisions  of  the  Panama  Canal  act  as  given  above — 
first,  because  no  tolls  are  to  be  levied  upon  ships  engaged 
in  the  coastwise  trade  of  the  United  States;  second,  be- 
cause a  discretion  appears  to  be  given  to  the  President  to 
discriminate  in  fixing  tolls  in  favor  of  ships  belonging  to 
the  United  States  and  its  citizens  as  against  foreign  ships. 

Sir  Edward  Grey  states: 

"  *  *  *  The  Panama  Canal  act  in  its  present 
form  conflicts  wdth  the  treaty  rights  to  which  His  Majesty's 
Government  maintain  they  are  entitled. 

"Under  Section  5  of  the  act  the  President  is  given, 
within  certain  defined  limits,  the  right  to  fix  the  tolls,  but 
no  tolls  are  to  be  levied  upon  ships  engaged  in  the  coast- 
wise trade  of  the  United  States,  and  the  tolls,  when  based 
upon  net  registered  tonnage  for  ships  of  commerce,  are 
not  to  exceed  one  dollar  and  twenty-five  cents  per  net 
registered  ton,  nor  be  less,  other  than  for  vessels  of  the 
United  States  and  its  citizens,  than  the  estimated  propor- 
tionate cost  of  the  actual  maintenance  and  operation  of 
tlie  canal.     *     *     * 


The  Financial   Aspects  143 

"The  effect  of  these  provisions  is  that  vessels  en- 
gaged in  the  coastwise  trade  will  contribute  nothing  to 
the  upkeep  of  the  canal.  *  *  *  Again,  in  the  cases 
where  tolls  are  levied,  the  tolls  in  the  case  of  ships  belong- 
ing to  the  United  States  and  its  citizens  may  be  fixed 
at  a  lower  rate  than  in  the  case  of  foreign  ships,  and  may 
be  less  than  the  estimated  proportionate  cost  of  the  actual 
maintenance  and  operation  of  the  canal. 

"These  provisions  (1)  clearly  conflict  with  the  rule 
embodied  in  the  principle  established  in  Article  VIII 
of  the  Clayton-Bulwer  treaty  of  equal  treatment  for 
British  and  United  States  ships,  and  (2)  would  enable 
tolls  to  be  fixed  which  would  not  be  just  and  equitable, 
and  would  therefore  not  comply  with  Rule  1  of  Article 
III  of  the  Hay-Pauncefote  treaty. 

"It  has  been  argued  that  as  the  coastwise  trade  of 
the  United  States  is  confined  by  law  to  United  States 
A  essels,  the  exemption  of  vessels  engaged  in  it  from  the 
payment  of  tolls  camiot  injure  the  interests  of  foreign 
nations.  It  is  clear,  however,  that  the  interests  of  foreign 
nations  will  be  seriously  injured  in  two  material  respects. 

"In  the  first  place  the  exemption  will  result  in  the 
cost  of  the  working  of  the  canal  being  borne  wholly  by 
foreign-going  vessels,  and  on  such  vessels,  therefore,  will 
fall  the  whole  burden  of  raising  the  revenue  necessary 
to  cover  the  cost  of  working  and  maintaining  the  canal. 
The  possibility,  therefore,  of  fixing  the  toll  on  such  vessels 
at  a  lower  figure  than  one  dollar  and  twenty-five  cents 
per  ton,  or  of  reducing  the  rate  below  that  figure  at  some 
future  time  will  be  considerably  lessened  by  the  exemption. 

"In   the   second   place,    the  exemption   will,   in    the 


144  The  Panama   Tolls  Controversy 

opinion  of  His  Majesty's  Government,  be  a  violation  of 
the  equal  treatment  secured  by  the  treaty,  as  it  will  put 
the  'coastwise  trade'  in  a  preferential  position  as  regards 
other  shipping.  Coastwise  trade  cannot  be  circumscribed 
so  completely  that  benefits  conferred  upon  it  will  not 
affect  vessels  engaged  in  the  foreign  trade.  To  take  an 
example,  if  cargo  intended  for  a  United  States  port 
beyond  the  canal,  either  from  east  or  west,  and  shipped 
on  board  a  foreign  ship  could  be  sent  to  its  destination 
more  cheaply  through  the  operation  of  the  proposed 
exemption,  by  being  landed  at  a  United  States  port 
before  reaching  the  canal,  and  then  sent  on  as  coastwise 
trade,  shippers  would  benefit  by  adopting  this  course 
in  preference  to  sending  the  goods  direct  to  their  destina- 
tion through  the  canal  on  board  the  foreign  ship. 

"Again,  although  certain  privileges  are  granted  to 
vessels  engaged  in  an  exclusively  coastwise  trade.  His 
Majesty's  Government  are  given  to  understand  that 
there  is  nothing  in  the  laws  of  the  United  States  which 
prevents  any  United  States  ship  from  combining  foreign 
commerce  with  coastwise  trade,  and  consequently  from 
entering  into  direct  competition  with  foreign  vessels 
while  remaining  'prima  facie'  entitled  to  the  privilege 
of  free  passage  through  the  canal.  Moreover,  any  re- 
striction which  may  be  deemed  to  be  now  applicable 
might  at  any  time  be  removed  by  legislation  or  even 
perhaps  by  mere  changes  in  the  regulations. 

"In  these  and  in  other  ways  foreign  shipping  would  be 
seriously  handicapped,  and  any  adverse  result  would  fall 
more  severely  on  British  shipping  than  on  that  of  any. 
other  nationality. 


The  Financial  Aspects  145 

"The  volume  of  British  shipping  which  will  use  the 
canal  will  in  all  probability  be  very  large.  Its  opening 
will  shorten  by  many  thousands  of  miles  the  waterways 
between  England  and  other  portions  of  the  British  Empire, 
and  if  on  the  one  hand  it  is  important  to  the  United  States 
to  encourage  its  mercantile  marine  and  establish  com- 
petition between  coastwise  traffic  and  transcontinental 
railways,  it  is  equally  important  to  Great  Britain  to  secure 
to  its  shipping  that  just  and  impartial  treatment  to  which 
it  is  entitled  by  treaty  and  in  return  for  a  promise  of  which 
it  surrendered  the  rights  which  it  held  under  the  earlier 
convention." 

The  Hay-Pauncefote  treaty  provides  that  tolls  shall 
be  "just  and  equitable."  Sir  Edward  Grey  pointedly 
observes : 

"The  purpose  of  these  words  was  to  limit  the  tolls 
to  the  amount  representing  the  fair  value  of  the  services 
rendered,  i.  e.,  to  the  interest  on  the  capital  expended  and 
the  cost  of  the  operation  and  maintenance  of  the  canal. 
Unless  the  whole  volume  of  shipping  which  passes  through 
the  canal,  which  benefits  all  equally  by  its  services,  is 
taken  into  account,  there  are  no  means  of  determining 
whether  the  tolls  chargeable  upon  a  vessel  represent  that 
vessel's  fair  proportion  of  the  current  expenditure  properly 
chargeable  against  the  canal;  that  is  to  say,  interest  on 
the  capital  expended  in  construction  and  the  cost  of  opera- 
tion and  maintenance.  If  any  classes  of  vessels  are  ex- 
empted from  tolls  in  such  a  way  that  no  receipts  from  such 
ships  are  taken  into  account  in  the  income  of  the  canal, 
there  is  no  guaranty  that  the  vessels  upon  which  tolls  are 
being  levied  are  not  being  made  to  bear  more  than  their 


146  The  Panama   Tolls  Controversy 

fair  share  of  the  upkeep.  Apart  altogether,  therefore, 
from  the  provision  in  Rule  1  about  equality  of  treatment 
for  all  nations,  the  stipulation  that  the  tolls  shall  be  just 
and  equitable,  when  rightly  understood,  entitles  His 
Majesty's  Government  to  demand,  on  behalf  of  British 
shipping,  that  all  vessels  passing  through  the  canal, 
whatever  their  flag  or  their  character,  shall  be  taken  into 
account  in  fixing  the  amount  of  the  tolls. 

"The  result  is  that  any  system  by  which  particular 
vessels  or  classes  of  vessels  were  exempted  from  the  pay- 
ment of  tolls  would  not  comply  with  the  stipulations  of 
the  treaty  that  the  canal  should  be  open  on  terms  on 
entire  equality,  and  that  the  charges  should  be  just  and 
equitable." 

We  will  now  proceed  to  show  that  the  foregoing  state- 
ments by  Sir  Edward  Grey  are  entirely  sound.  To  do  this 
we  ask  the  reader  to  note  the  language  used  in  the  last 
sentence  of  Section  1,  Article  III,  of  the  Hay-Pauncefote 
treaty;  namely,  "Such  conditions  and  charges  of  traffic 
shall  be  just  and  equitable." 

John  Hay  states:  "One  amendment  proposed  by 
Lord  Lansdowne  was  regarded  by  President  McKinley 
as  so  entirely  reasonable  that  it  was  agreed  to  without  dis- 
cussion. This  was  the  insertion  at  the  end  of  Clause  1 
of  Article  III  of  the  words:  'Such  conditions  and  charges 
of  traffic  shall  be  just  and  equitable.^  " 

How  are  charges  that  are  just  and  equitable,  in  this 
instance,  determined?  The  Panama  Canal  is  an  inter- 
national utility — a  public  utility.  So  considered,  the 
foregoing  question  is  easily  answered  from  a  financial 
standpoint. 


The  Financial   Aspectit  147 

The  common  law  of  England  and  America,  the  pulilic 
policy  especially  of  America  at  the  very  time  tliis  treaty 
was  being  negotiated,  enforced  with  unsparing  rigor  the 
duty  of  equal  charges  and  equal  service  by  all  public 
utilities  to  all  the  public  which  they  were  to  serve.  Dis- 
crimination is  outlawed.  All  must  })ay  the  same  charge 
for  identical  units  of  service. 

The  general  principles  underlying  charges  that  are 
just  and  equitable  are  no  longer  subject  matter  for  debate. 
They  have  been  established  by  court  decisions — state  and 
national,  including  the  United  States  Supreme  Court. 
There  is  difference  of  opinion  as  to  what  may  be  included 
in  the  investment  account  on  which  a  reasonable  return 
must  be  allowed.  In  the  case  of  the  Panama  Canal,  the 
amount  of  the  bona  fide  investment  is  easily  determined. 
Therefore,  where  difference  of  opinion  exists  in  the  regula- 
tion of  public  utilities  none  can  exist  here. 

The  difference  of  opinion  in  this  (tolls)  case  is  in 
regard  to  rates.  Must  American  shippers  pay  the  same 
rate  as  foreign  shippers  for  identical  units  of  traffic? 

The  principles  as  established  in  the  regulation  of 
national,  state  and  municipal  utilities  compel  all  to  pay 
the  same  rate  for  an  identical  unit  of  service.  The  same 
principle  applies  to  the  Panama  Canal,  which  is  an  inter- 
national utility  whereof  the  United  States  is  merely  the 
trustee  as  far  as  concerns  the  fixing  of  tolls.  It  cannot 
honorably  apply  one  principle  in  the  regulation  of  national, 
state  and  municipal  utilities  and  another  principle,  in 
short,  the  monopoly  principle,  in  the  management  of  the 
Panama  Canal. 

A  rate  that  isjmt  and  equitable  provides  for  operating 


148  The  Pcmama  Tolh  Controversy 

expenses,  interest  on  the  investment  and  a  reasonable 
amount  for  amortization  of  the  principle.  This  fixes  the 
amount  to  be  collected  from  the  users  of  the  canal  over  a 
normal  business  period.  The  volume  of  traffic  then  deter- 
mines the  rate  to  be  charged.  The  rate  is  a  resultant  of 
the  amount  to  be  collected  to  make  the  canal  commercially 
self-sustaining  and  the  volume  of  traffic.  A  rate  deter- 
mined in  this  way  \sjust  and  equitable  and  it  must  be  deter- 
mined in  this  way  to  be  just  and  equitable.  Exempting  anj^ 
traffic  from  the  payment  of  its  proportionate  share  of  the 
tolls  means  that  the  traffic  not  exempted  from  payment 
must  contribute  through  a  higher  rate  the  amount  which 
should  have  been  levied  on  the  traffic  relieved  from 
payment. 

The  tolls  levied  under  the  Panama  Canal  act  cannot 
be  made  just  and  equitable  as  these  terms  are  understood 
in  the  regulation  of  national,  state  and  municipal  utilities. 
The  whole  outlay  must  be  levied  on  the  traffic  as  soon  as 
the  volume  of  traffic  permits.  The  act  requires  that  no 
tolls  be  levied  on  our  coastwise  traffic  and  permits  our 
foreign  commerce  to  be  relieved  from  any  payment  what- 
soever. The  entire  outlay,  therefore,  must  be  levied  on 
the  remainder  of  the  traffic  through  the  canal,  thereby 
imposing  thereon  a  rate  that  is  higher  than  one  that  is 
just  and  equitable — the  rate  assured  to  non-nationals  by 
the  Hay-Pauncefote  treaty. 

The  United  States  need  not  assess  taxpayers  with 
canal  construction  and  operating  expenses  if  it  manage 
the  canal  as  a  business  enterprise.  If  it  has  already 
assessed   taxpayers   therefor,  it  has  failed  in  the  proper 


The  Financial   Aspects  149 

exercise  of  its  function  as  trustee  of  this  international 
utility  and  should  immediately  employ  an  expert  account- 
ant for  the  purpose  of  introducing  business  methods  into 
the  management  of  the  canal.  It  is  not  enough  that  the 
construction  department  be  efficient.  The  accounting 
department  should  keep  the  records  so  that  the  entire 
outlay  can  be  charged  to  revenue  as  rapidly  as  income 
permits.  The  amounts  charged  to  taxes  should  be  treated 
in  the  canal  accounts  as  a  suspense-debit  and  the  United 
States  treasury  should  be  reimbursed  as  soon  as  the  debit 
can  be  extinguished  from  surplus  revenue. 

It  is  not  necessary  in  a  long-period  project  such  as 
the  Panama  Canal  that  revenue  exceed  operating  expenses 
and  interest  on  the  investment  in  its  initial  stages  for  the 
undertaking  to  be  commercially  self-supporting.  It  is 
only  necessary  that  in  a  normal  business  period  (say 
twenty-five  years)  the  revenue  exceed  total  operating 
outlay  and  interest  on  investment.  The  deficit  of  the 
initial  period  is  merely  a  suspense-debit  to  be  amortized 
when  revenue  exceeds  operating  outlay.  Thus  viewed, 
the  Panama  Canal  will  be  commercially  self-sustaining 
from  the  beginning,  if  the  history  of  the  Suez  Canal  and 
similar  projects  are  any  criterion. 

The  management  of  the  Panama  Canal  is  similar  to 
that  of  a  transportation  company.  A  railway  through 
new  territory  will  have  a  deficit  period  in  which  traflic  is 
developed.  This  deficit  with  accrued  interest  thereon  is 
extinguished  by  being. charged  to  surplus  revenue  after 
traffic  has  been  developed  and  the  company  has  revenue 
in  excess  of  the  annual  operating  expenses  and  interesl 
charges. 


150  The  Panama  Tolls  Controversy 

This  is  a  birds'-eye-view  of  the  Panama  Canal  situa- 
tion today.  The  outlook  is  for  a  deficit  period  of  about 
ten  years.  Thereafter  there  will  be  an  annual  increase  in 
surplus  for  an  indefinite  period  if  a  reasonable  rate  is 
charged  the  users  of  the  canal.  During  this  period,  the 
earlier  deficit  can  be  extinguished  by  being  charged  to 
surplus  revenue.  If  the  canal  is  properly  managed,  there 
will  be  no  indirect  subsidy  to  foreign  shipping,  as  the  canal 
will  be  a  commercially  self-supporting  enterprise — 
kindergarten  financial  arguments  in  the  congressional  de- 
bates on  the  repeal  of  the  tolls-exemption  clause  of  the 
Panama  Canal  act  to  the  contrary  notwithstanding. 

Hence,  it  is  evident  that  the  United  States  can  in 
due  course  levy  the  entire  Panama  Canal  expenditures 
including  interest  and  investment  on  the  traflBc.  The 
Hay-Pauncefote  treaty  permits  it.  A  charge  that  is  just 
and  equitable  requires  it.  No  traffic  not  exempted  by  rea- 
son of  securing  leasehold  rights  to  the  Canal  Zone  can  be 
relieved  from  contributing  its  proportionate  share  to  this 
end.  The  total  traffic  through  the  canal,  less  the  amount 
exempted  in  securing  leasehold  rights,  including  our  public 
vessels,  fixes  the  amount  of  traffic  on  which  the  amount 
to  be  levied  must  be  assessed  during  a  normal  business 
period.  The  rate  is  the  resultant.  If  levied  in  this  way, 
it  is  just  and  equitable. 

Just  what  kind  of  discrimination  is  alleged  against 
the  Panama  Canal  act.  Let  us  illustrate  the  principle 
thereof.  Assume  a  railway  enterprise  that  needs  an  in- 
come of  $150,000  a  year  for  operating  expenses  and  a 
reasonable  return  on  its  investment.  If  there  are  1,500 
users,  each  must  pay  $100.    All  use  the  facility  the  same 


The  Fmajicial   A.^pecfs  I.M 

amount  and  each  user  pays  his  porportionate  share 
oi  the  needed  revenue.  The  revenue  of  the  company  is 
$150,000.  The  charge  is  just  and  equitable.  A  railway 
is  a  public  utility.  Let  it  grant  free  transportation  to 
oOO  theretofore  users  who  paid  their  proportionate  share. 
Only  1,200  users  of  the  facility  thereafter  pay.  The  com- 
pany still  needs  $150,000  income  a  year.  The  charge 
thereafter  is  $125  instead  of  $100  to  those  compelled 
to  pay.  In  short,  free  transportation  to  some  means  a 
higher  charge  to  the  remainder — a  charge  that  is  not 
just  and  equitable.  This  is  the  kind  of  discrimination 
complained  of  by  Great  Britain.  This  is  the  Panama  Canal 
tolls  question  in  a  nutshell. 

What  amount  of  revenue  is  needed  to  make  the 
Panama  Canal  commercially  self-supporting?  The 
Isthmian  Canal  Commission  report  says: 

"The  annual  revenue  ultimately  required  to  make 
the  canal  commercially  self-supporting  will  be  about 
$19,500,000.  It  is  estimated  that  the  operating  and 
maintenance  expenses  will  amount  to  $3,500,000  yearly, 
and  that  $500,000  will  be  required  for  sanitation  and  for 
the  government  of  the  Zone.  The  interest  on  $375,000,- 
000  at  three  per  cent  per  annum  amounts  to  $11,250,000, 
and  the  treaty  with  Panama  guarantees  an  annuity, 
beginning  in  1913,  of  $250,000  to  the  Republic  of  Panama. 
The  sum  of  these  four  items  is  $15,500,000.  If  to  this 
there  be  added  one  per  cent  per  annum  on  $375,000,000 
to  accumulate  a  sinking  fund  to  amortize  the  investment, 
the  total  expenses  will  be  $19,250,000." 

The  Isthmian  Canal  Commission  report  is  some- 
what out  of  date  as  to  cost  of  con.struction.     If  cost  is 


152  The  Panama  Tolls  Controversy 

$400,000,000,  as  is  now  claimed,  the  annual  revenue 
needed  will  be  approximately  $20,000,000.  Will  the  in- 
come of  the  Panama  Canal  exceed  this  amount  if  conducted 
as  a  business  enterprise? 

The   above-mentioned   report   states: 

"The  investigation  of  the  traffic  available  for  the 
use  of  the  canal  led  to  the  conclusion  that  about  10,500,000 
tons  net  register  of  shipping  will  pass  through  the  canal 
during  the  early  years  of  its  operation.  The  rate  at 
which  the  Suez  Canal  tonnage  and  the  commerce  of  the 
world  is  increasing  indicates  that  an  increase  of  at  least 
sixty  per  cent  in  the  traffic  of  the  Panama  Canal  may  be 
expected  during  the  decade  1915-25.  It  is  thus  probable 
that  there  will  be  17,000,000  tons  of  shipping  using 
the  canal  during  1925.  An  increase  of  sixty  per  cent 
during  the  second  decade  of  the  canal's  operation  would 
bring  the  traflic  up  to  27,000,000  net  register  tons  at  the 
end  of  twenty  years.  The  estimates  are  believed  to  be 
conservative.  If  the  traffic  of  the  Panama  Canal  shall  be 
equal  to  these  estimates,  it  will  be  possible  to  secure 
from  moderate  tolls  enough  revenues  to  enable  the  canal 
to  be  commercially  self-supporting." 

It  is  thus  evident  that  the  income  from  the  Panama 
Canal  will  be  sufficient  to  make  it  commercially  self- 
supporting  if  it  is  managed  as  a  business  enterprise  by 
competent  officials. 

The  foregoing  is  germane  only  if  the  canal  can  be 
made  commercially  self-supporting.  The  history  of  the 
Suez  Canal  will  throw  light  on  the  subject,  and  the 
Isthmian    Canal    Commission    report   will    give   us   the 


The  Financial  Aspects  15S 

best  information  available.  The  text  of  this  report  was 
written  by  Emory  R.  Johnson — one  of  the  greatest  trans- 
portation experts. 

The  Suez  Maritime  Canal  Company  is  the  owner 
and  operator  of  this  canal.  Its  cost  of  construction  was 
about  $125,000,000  to  1912. 

Condensed  income  statement  for  1911: 

Operating  revenues $27,600,000 

Operating  expenses 2,700,000 

•  Net  operating  income     $24,900,000 

This  amount  ($24,900,000)  was  available  for  re- 
serves, interest  and  dividends — and  note  that  the  invest- 
ment was  only  about  $125,000,000. 

The  United  States  needs  about  $20,000,000  a  year 
for  a  period  of  say  twenty-five  years  to  conduct  the 
canal  as  a  business  enterprise.  This  will  make  a  total  of 
$500,000,000  for  the  period.  It  is  believed  that  the  revenue 
during  the  first  year  will  be  about  $10,000,000  and  that 
it  need  not  be  less  than  $30,000,000  the  twenty-fifth  year. 
That  would  be  an  average  annual  income  of  $20,000,000, 
or  the  total  of  $500,000,000  for  the  period. 

Now,  grant  free  transportation  to  our  coastwise 
traffic  and  what  happens.'  The  amount  of  income  needed 
for  the  period  is  still  $500,000,000.  If  the  average  yearly 
revenue  from  coastwise  traffic  would  have  been  $4,000,000, 
the  total  would  be  $100,000,000.  Other  users  would  have 
to  pay  this  amount  in  a  higher  rate.  The  resulting  rate 
would  not  be  just  and  equitable  and  would  be  establishe<l 


154  The  Panama   Tolls  Controversy 

in  \'iolation  of  the  Hay-Pauncefote  treaty.     This  is  the 
claim  of  Great  Britain.    The  claim  is  sustained. 

The  United  States  needs  about  $20,000,000  a  year 
in  revenue  from  the  Panama  Canal  to  cover  interest,  all 
operating  charges,  the  annuity  to  Panama  and  a  sinking 
fund  charge  of  $4,000,000.  Only  $20,000,000  a  year  is 
needed  to  conduct  it  as  a  business  enterprise.  The  income 
of  the  Suez  Canal  is  now  considerably  in  excess  of  this 
amount.  The  revenues  of  the  Panama  Canal  vdW  exceed 
the  present  income  of  the  Suez  Maritime  Canal  Company 
in  twenty  years,  if  conducted  on  business  principles. 

It  seems  to  be  the  adopted  policy  of  the  United  States 
to  make  the  canal  commercially  self-supporting  and  to 
extinguish  its  liability  therefor  by  an  amortization  charge 
to  revenue.  Business  prudence  and  political  wisdom 
demand  that  it  shall  be  made  commercially  self-supporting, 
provided  revenues  large  enough  to  enable  the  canal  to 
carry  itself  can  be  secured  without  unwisely  restricting 
traffic.  Expert  opinion  is  to  the  effect  that  this  can  be 
done. 

Ex-President  Taft  has  clearly  stated  the  policy  that 
the  United  States  should  pursue  in  managing  the  canal; 
namely : 

"I  believe  that  the  cost  of  such  a  Government  work 
as  the  Panama  Canal  ought  to  be  imposed  gradually  but 
certainly  upon  the  trade  which  it  creates  and  makes 
possible.  So  far  as  we  can,  consistent  with  the  develop- 
ment of  the  world's  trade  through  the  canal  and  the 
benefit  which  it  is  intended  to  secure  to  the  east  and  west 
coastwise  trade,  we  ought  to  labor  to  secure  from  the  canal 


The  Financial   At-pcctn  166 

tolls  a  sufficient  amount  ultimately   to   meet  the  debt 
which  we  have  assumed,  and  to  pay  the  interest." 

The  Panama  Canal  act  is  in  harmony  therewith. 
It  merely  needs  good  management  and  iip-to-dat<> 
accounting. 

In  the  fixing  of  tolls,  the  President  is  vested  with  some 
discretion.  A  maxunum  and  a  minimum  rate  are  fixed 
for  foreign  commerce  using  the  canal.  The  amount  im- 
posed on  the  traffic  must  cover  carrying  charges,  as  that 
is  understood  in  modern  business,  as  soon  as  it  can  be  done 
without  exceeding  the  maximum  rate  fixed  by  the  canal 
act.  The  Panama  Canal  act  is  thus  in  harmony  with  the 
foregoing  view  expressed  by  ex-President  Taft. 

The  policy  that  the  United  States  should  adopt  in 
the  management  of  the  Panama  Canal  is  expressed  as 
follows  by  Professor  Johnson : 

"The  United  States  should  adhere  to  business  prin- 
ciples in  the  management  of  the  Panama  Canal.  The 
Government  needs  to  guard  its  revenues  carefully.  Pres- 
ent demands  on  the  general  budget  are  hea\'y  and  are 
certain  to  be  larger.  Taxes  must  necessarily  increase. 
Those  who  directly  benefit  from  using  the  canal,  rather 
than  the  general  tax  payers,  ought  to  pay  the  expenses  of 
operating  and  carrying  the  Panama  Canal  commercially." 

The  following  statement  by  Professor  Johnson  is 
now  apropos: 

"In  considering  the  effect  of  exemi)ting  the  coast- 
wise shipowners  from  toll  payments  it  is  possibly  well 
to  bear  in  mind  that  the  charges  that  have  been  fixed 
bv  the  President  for  the  use  of  the  canal— one  dollar  and 


156  The  Panama  Tolls  Controversy 

twenty  cents  for  each  one  hundred  cubic  feet  of  the 
earning  capacity  of  vessels,  with  a  reduction  of  forty 
per  cent  in  the  rate  for  vessels  without  passengers  or 
cargo — are  not  the  highest  rates  that  might  have  been 
imposed  without  restricting  traffic,  nor  are  the  rates  such 
that  higher  charges  would  have  lessened  the  revenues 
from  the  canal.  The  tolls  are  neither  all  the  traffic  would 
bear,  nor  have  they  been  fixed  with  a  view  to  securing 
maximum  possible  revenues. 

"It  is  obvious  that  with  a  given  rate  of  tolls  the  canal 
revenues  will  be  larger  if  all  vessels  using  the  canal  are 
charged  tolls,  and  will  be  smaller  if  any  class  of  vessels, 
as  the  American  coastwise  shipping,  is  exempted  from 
the  charges. 

"It  is  likewise  self-evident  that  if  it  be  desired  to  se- 
cure an  income  of  a  definite  amount,  as,  for  example, 
revenues  that  will  cover  outlays  for  operation,  main- 
tenance, interest  and  amortization — revenues  that  will 
make  the  canal  commercially  self-supporting — the  rate 
of  tolls  must  be  increased  proportionately  with  any 
reduction  of  the  tonnage  resulting  from  the  exemption 
of  any  class  or  classes  of  shipping  from  the  payment  of 
the  charges. 

"These  statements  are,  of  course,  mere  truisms. 
There  will  be  nothing  new  or  unusual  about  the  Panama 
Canal  finances.  If  the  canal  does  not  support  itself,  the 
taxpayers  must  support  it.  The  amount  required  to  meet 
the  current  expenses  and  capital  costs  of  the  canal  can 
be  derived  only  from  the  tolls  paid  by  those  who  use 
the  waterway  or  from  taxes  paid  by  the  public  who  own 
the  canal;  and,  as  regards  the  income  from  tolls,  the  sum 
received  must  be  affected  both  by  the  rate  of  charges 


The  Financial  AspecU  1.37 

and  by  the  share  of  the  tonnage  that  is  subject  to  or 
exempted  from  the  charges. 

"It  is  estimated  that  $19,250,000  will  be  required 
annually  to  make  the  canal  commercially  self-sui)portiiig. 
This  total  is  made  up  of  $3,500,000  for  operating  and 
maintenance  expenses,  $500,000  for  sanitation  and  zone 
government,  $250,000  which  is  the  annuity  payable  to 
Panama  under  the  treaty  of  1903,  $11,250,000  to  pay 
three  per  cent  on  the  $375,000,000  invested  in  the  canal, 
and  $3,750,000  for  an  amortization  fund  of  one  per  cent 
per  annum  upon  the  cost  of  the  canal. 

"It  has  been  ascertained  by  a  detailed  study  of  the 
traffic  that  might  advantageously  use  the  Panama  Canal 
and  of  the  rate  at  which  that  commerce  is  increasing 
that,  during  the  first  year  or  two  of  the  canal's  operation, 
that  is  in  1915,  the  ships  passing  through  the  canal  will 
have  an  aggregate  net  tonnage  of  about  10,500,000  tons. 
Of  this  initial  tonnage  about  1,000,000  net  tons  will  con- 
sist of  shipping  employed  in  the  trade  between  the  two 
seaboards  of  the  United  States.  The  evidence  as  to  the 
past  rate  of  grow^th  of  the  world's  commerce  justifies  the 
estimate  that  by  the  end  of  the  first  decade,  that  is,  in 
1925,  the  total  net  tonnage  of  the  shipping  passing  through 
the  canal  annually  wall  be  about  17,000,000  tons,  of 
which  at  least  2,000,000  tons  will  be  contributed  by  the 
coastwise  shipping." 

It  is  likely  that  growth  in  the  amount  of  the  traffic 
that  will  be  shipped  through  the  canal  will  continue 
in  later  decades  in  even  larger  volume  than  during  the 
first  decade.  This  points  to  the  possibility  of  making  the 
canal  commercially  self-supporting. 


158  The  Panama   Tolls  Controversy 

Professor  Johnson  says  in  another  place: 
"Tolls  are  to  be  levied  and  collected  at  Panama 
presumably  to  pay  the  expenses  for  running  and  main- 
taining the  canal  and  for  meeting  the  interest  charges 
on  the  funds  invested  in  the  canal;  and  it  is  to  be  expected 
that  it  will  be  the  policy  of  the  United  States  to  make 
the  canal  commercially  self-supporting,  if  the  traffic 
is  large  enough  to  secure  the  requisite  revenues  without 
unduly  restricting  the  usefulness  of  the  waterway.  It 
will  not  be  the  policy  of  the  United  States  to  obtain 
profits  in  excess  of  the  revenues  required  to  meet  operat- 
ing, maintenance,  interest,  and  amortization  charges; 
but,  if  the  traffic  proves  to  be  as  large  as  it  seems  prob- 
able that  it  will  be,  the  policy  of  the  United  States  will 
doubtless  be  to  have  the  canal  carry  itself  commercially — 
to  limit  Ahe  canal  expenses  borne  by  the  general  tax- 
payers of  the  United  States  to  the  military  and  naval 
outlays  required  for  the  defense  of  the  canal  and  for  the 
maintenance,  at  the  isthmus,  of  forts  and  naval  bases. 

"If  it  shall  be,  as  it  ought  to  be,  the  policy  of  the 
Government  to  make  the  canal  commercially  self-support- 
ing, it  is  obvious  that  the  rate  of  tolls  imposed  must  be 
affected  by  the  tonnage  upon  which  the  charges  are  levied; 
and  that,  if  the  toll-bearing  tonnage  is  reduced  by  the  ex- 
emption of  the  large  volume  of  shipping  owned  by  the  in- 
dividuals and  corporations  engaged  in  the  coastwise  trade, 
the  rate  of  charges  payable  by  the  owners  of  American 
ships  in  the  foreign  trade  and  by  the  citizens  owning 
vessels  under  foreign  flags  must  be  higher  than  the  rate 
would  be  if  all  vessels  using  the  canal  were  required  to 
pay  tolls." 


The  Financial   Aspects  151) 

Ex-President  Taft  says: 

"The  tolls  have  been  fixed  on  the  canal  for  all  the 
world  on  the  assumption  that  the  coastwise  traffic  is  to 
pay  tolls.  Our  giving  it  immunity  from  tolls  docs  not,  in 
our  judgment,  affect  the  traffic  of  the  other  countries  in 
any  other  way  than  it  would  affect  it  if  we  had  voted  a  sub- 
sidy equal  to  the  tolls  remitted  to  our  ships." 

Why  insist  on  a  method  of  granting  a  subsidy  to  our 
coastwise  shipping  claimed  to  be  repugnant  to  the  Hay- 
Pauncefote  treaty  if  no  pecuniary  advantage  is  aimed  at . 
If  no  part  of  the  revenue  that  would  have  been  contributed 
by  our  coastwise  shipping  is  to  be  levied  against  other 
shipping  through  the  canal,  it  is  not  clear  why  this  method 
of  granting  the  subsidy  should  be  so  stubbornly  insisted 
on.  Something  other  than  method  of  granting  a  subsidy 
is  aimed  at.  Monopoly  power  in  the  management  of  the 
Panama  Canal  is  the  goal  of  champions  of  tolls-exemption. 

Could  it  have  been  intended  as  a  permanent  policy  to 
estimate  the  amount  of  our  coastwise  shipping  through 
the  canal  and  to  consider  it  in  fixing  the  rate  to  be  charged 
other  shipping?  There  is  no  evidence  that  that  was  to  be 
or  could  be  the  policy  of  the  United  States.  There  is 
evidence  that  it  was  to  be  the  policy  of  the  United  States 
to  treat  our  coastwise  shipping  as  we  treat  our  public 
vessels  through  the  canal. 

The  question  arises  as  to  whether  the  canal  can  be 
made  commercially  self-supporting  under  those  condi- 
tions. It  seems  probable.  It  will  take  a  longer  develop- 
ment (initial  or  deficit)  period  and  thus  a  deferred  date 
when  the  whole  liability  incurred  in  construction  can  be 


160  The  Panama  Tolls  Controversy 

amortized  through  charges  to  revenue.  It  would  merely 
defer  the  date  when  the  canal  would  become  commercially 
self-supporting.  Therefore,  the  necessity  of  proper  busi- 
ness and  accounting  methods  from  the  beginning  in  order 
that  all  traffic  through  the  canal  beginning  wuth  the  first 
cargo  shall  contribute  its  proportionate  share  to  the  up- 
keep of  the  canal  and  to  the  amount  needed  to  amortize 
the  liability  incurred  in  construction. 

The  United  States  is  builder,  owner  and  manager 
of  the  Panama  Canal,  an  international  waterway.  It 
should  manage  and  control  it  as  a  trust  in  the  interest  of 
civilization.  That  she  has  obligated  herself  to  do  this  is 
shown  in  State  Department  and  other  public  documents 
from  1826  to  the  adoption  of  the  Hay-Pauncefote  treaty. 

Civilization  will  clieerfully  allow  the  United  States 
(1)  operating  expenses;  (2)  interest  on  investment; 
(3)  a  reasonable  amortization  charge  to  extinguish  the 
$400,000,000  liability  incurred  in  construction;  (4)  a 
reasonable  reserve  for  betterment,  so  that  in  the  future 
we  may  have  an  up-to-date  canal  with  a  cost  of  construc- 
tion higher  than  the  initial  $400,000,000.  Yet,  our 
jingoes  are  not  satisfied.  They  aim  at  the  exercise  of 
monopoly  power. 

No  nation  is  honorable  enough  to  be  entrusted  with 
or  to  have  the  right  to  exercise  monopoly  power  over  an 
international  highway  such  as  the  Panama  Canal.  The 
fleecing  of  the  world's  commerce  by  the  Suez  Maritime 
Canal  Company  is  appalling.  That  history  should  find 
no  parallel  in  the  case  of  the  Panama  Canal.  The  Hay- 
Pauncefote  treaty  prohibits  it.  The  Suez  Canal  treaty  does 


The  Financial  Aspects  im 

not.  England  has  protested  and  her  protest  is  in  thr 
interest  of  collective  civilization.  The  fixing  of  the  charge 
that  shall  be  just  and  equitable  should  not  be  left  to  the 
discretion  of  the  United  States. 

Stated  a  little  differently,  the  United  States,  which 
is  trying  to  eliminate — yea,  is  pledged  to  eliminate — the 
principle  of  private  monopoly  in  the  national  domain, 
is  now  attempting  to  establish  the  monopoly  principle 
in  the  management  of  the  Panama  Canal.  It  is  trying 
to  put  itself  into  a  position  to  fix  charges  that  arc  other 
than  "just  and  equitable,"  the  charges  pledged  in  the  Hay- 
Pauncefote  treaty  and  in  the  Panama  Canal  treaty.  The 
business  situation  points  to  large  monopoly  profits  after 
traffic  has  been  developed.  When  the  debt  is  extinguished 
by  amortization,  the  income  can,  by  adjusting  the  rate, 
be  made  to  be  three  to  six  times  the  total  outlay  for 
management. 

Monopoly  power  without  a  sovereign  is  dangerous — 
intolerable,  even  though  exercised  by  the  United  States. 
The  beam  in  John  Bull's  eye  has  its  counterpart  in  the  mote 
in  Uncle  Sam's  eye. 

It  is  of  the  utmost  importance  to  civilization  that 
England  shall  not  waive  the  rights  guaranteed  to  her  in 
the  Hay-Pauncefote  treaty,  and  that  she  compel  their 
recognition  by  the  United  States.  That  will  prevent 
monopoly  power,  a  power  which  is  intolerable  when  exer- 
cised without  a  sovereign,  and  the  United  States  recognizes 
none. 

The  United  States  ought  to  be  too  large-minded,  too 
self-respecting,  too  decent  to  seek  monopoly  power  in 
the  management  of  the  Panama  Canal.    The  welfare  of 


162  The  Panama   Tolls  Controversy 

collective  civilization  requires  that  the  attempt  fail  and 
that  England's  contention  prevail. 

Let  us  picture  to  ourselves  the  situation  through 
operating  statistics: 

INCOME  STATEMENT  OF  THE  SUEZ  CANAL  FOR  1911 

Operating  revenues $27,600,000 

Operating  expenses 2,700,000 

Operating  income    24,900,000 

Other  outlays $10,700,000 

Available  for  dividends    $14,200,000 

Dividend  declared 33  per  cent 

The  picture  as  it  should  have  been : 
Investment $125,000,000 

Reasonable  return  on  investment — 6's    ....       $7,500,000 

Operating  expenses 2,700,000 

Additional  charge  needed  for  safety 3,600,000 

Total  needed    $13,800,000 

Revenue  in  1911    $27,600,000 

Revenue  needed 13,800,000 

One-half  the  rate  of  toll  actually  levied  would  have 
yielded  the  $13,800,000  needed  to  conduct  the  canal  as  a 
business  enterprise.    The  world's  commerce  was  charged 


The  Financial    A. s- perls  1({;; 

exorbitant  rates  through  the  Suez  Canal.  This  should 
never  be  paralleled  in  the  management  of  the  Piuiain.i 
Canal. 

Let  us  now  imagine  another  picture — tiie  Panama 
Canal  in  1975: 

ABRIDGED  CAPITAL  ACTOINT 

Cost  of  construction $400,000,000 

Betterment  charged  to  revenue  (assumed)  .     100,000,000 

Total  cost $500,000,000 

The  investment  was  amortized  through  charges  to 
revenue.  Money  cost  to  the  United  States  in  1975 — 
nothing. 

ABRIDGED  INCOME  STATEMENT 

Operating  revenues  (conservative) $38,000,000 

Operating  expenses  (liberal) 8,000,000 

Monopoly  profit    $30,000,000 

To  prevent  the  possibility  of  such  a  condition  as  is 
pictured  in  the  abridged  income  statement  given  above, 
England  has  protested  against  the  exemption  of  our  coast- 
wise shipping  through  the  canal  from  the  payment  of  lolls. 
Her  protest  was  wise  and  timely. 

The  state  (we  use  the  word  in  a  technical  sense) 
acts  on  the  basis  of  living  forever.  This  is  an  axiom  of 
political  science.    England's  protest  is  in  harmony  with 


164  The  Panama   Tolls  Controversy 

this  principle.  English  statesmen  are  far-seeing.  They  see 
pictures  similar  to  the  ones  we  presented  above. 

The  monopoly  power  which  the  United  States  seeks 
to  establish  in  the  management  of  the  Panama  Canal 
ought  not  to  be  acquiesced  in  in  the  interest  of  social  jus- 
tice and  collective  civilization.  England's  position  is 
correct.  The  Hay-Pauncefote  treaty  should  be  preserved 
unimpaired.  Its  meaning  is  plain.  John  Hay,  the  soul 
of  honor,  has  told  us  what  it  means. 

Senator  Root  says : 

"We  know  from  many  sources  what  Mr.  Hay's  views 
were.  The  Senator  from  Connecticut  (Mr.  McLean)  has 
read  to  you  a  statement  of  them,  authentic,  made  about 
the  time  of  the  treaty,  at  the  time  the  treaty  with  Panama 
was  under  consideration." 

Here  is  what  Mr.  Hay  says : 

"All  means  all.  The  treaty  was  not  so  long  that  we 
could  not  have  made  room  for  the  word  'other'  if  we  had 
understood  that  it  belonged  there.  'All  nations'  means 
all  nations,  and  the  United  States  is  certainly  a  nation." 

"That  was  the  understanding  between  yourself  and 
Lord  Pauncefote  when  you  and  he  made  the  treaty?"  I 
pursued. 

"It  certainly  was,"  he  replied.  "7f  was  the  under- 
standing of  both  Governments,  and  I  have  no  doubt  that  the 
Senate  realized  that  in  ratifying  the  second  treaty  without 
such  an  amendment  it  was  committing  lis  to  the  principle 
of  giving  all  friendly  nations  equal  privileges  in  the  canal 
ivith  ourselves.     That  is  our  golden  rule." 

"A  decent  respect  to  the  opinions  of  mankind"  should 
impel  the  United  States  to  manage  the  Panama  Canal 


The  Financial   Aspects  16.5 

as  a  business  enterprise;  that  is,  in  entire  accord  witli  the 
principles  established  in  the  regulation  of  public  utilities. 
If  so,  it  will  voluntarily  manage  the  canal  as  the  Hay- 
Pauncefote  treaty  obligates  it  to  do — even  that  ivithout 
the  intervention  of  a  treaty.  It  will  assume  different  stand- 
points— one  as  owner,  the  other  as  sovereign.  As  owner, 
it  will  manage  the  canal  as  a  business  enterprise.  As  a 
self-respecting  sovereign,  it  will  see  to  it  that  as  owner  it 
manages  it  as  a  public  utility  and  levies  the  revenue  (no 
more  and  no  less)  needed  to  make  the  canal  commercially 
self-supporting. 

Again  looms  large  the  pivotal  sentence  of  the  Hay- 
Pauncefote  treaty;  namely,  "Such  conditions  and  charges 
of  traffic  shall  be  just  and  equitable."'  A  proper  construction 
of  this  sentence  precludes  free  transportation  through  the 
canal  except  the  traffic  named  in  the  contract  (Panama 
Canal  treaty)  to  secure  leasehold  rights  to  the  Canal  Zone. 
Just  and  equitable  is  a  well-defined  expression  in  the  litera- 
ture which  deals  with  the  regulation  of  public  utilities. 
It  precludes  favoritism.  It  requires  equal  opportunity 
for  all  in  the  use  of  this  international  waterway.  It  re- 
quires that  the  same  toll  be  charged  for  equal  units  of 
service.  The  direct  commercial  benefits  of  the  owner 
must  come  from  the  fixing  of  an  adequate  rate  for  the  use 
of  the  facility  and  the  collection  of  suflBcient  revenue  to 
make  it  commercially  self-supporting. 

The  import,  the  significance,  in  short,  the  full  meaning 
of  the  foregoing  sentence  from  the  Hay-Paunccfote  treaty 
was  not  brought  out  in  the  recent  congressional  debate 
on  the  tolls-exemption  repeal.  All  statements  are  either 
inadequate  or  incorrect.     Viewed  from  the  standpoint 


1()6  The  Panama   Tolls  Controversy 

of  the  principles  developed  in  the  regulation  of  national, 
state  and  local  utilities,  the  sentence  entitles  the  United 
States  to  fix  a  rate  of  toll  so  that  it  will  be  re-imbursed 
for  all  expenditures  incurred,  including  interest  during 
construction  and  deficits  during  the  period  in  which  traffic 
is  developed.  Note  the  following  from  an  opinion  by  Jus- 
tice Miller  of  the  New  York  Court  of  Appeals : 

"I  define  'going  value'  for  rate  purposes  as  *  *  * 
the  amount  equal  to  the  deficiency  of  net  earnings  below 
a  fair  return  on  the  actual  investment  due  solely  to  the 
time  and  expenditures  reasonably  necessary  and  proper 
to  the  development  of  the  business  and  property." 

Deficits  during  a  development  period  can  be  amortized 
after  traffic  is  developed  and  revenues  exceed  annual  out- 
lay. The  United  States,  as  owner  of  the  Panama  Canal, 
is  entitled  to  a  return  on  it  as  a  public  utility,  collected 
under  the  restrictions  established  for  such  a  utility. 

The  limitations  imposed  on  the  United  States  by  the 
Hay-Pauncefote  treaty  are  merely  commercial.  Its 
investment  interest  is  safeguarded  by  being  entitled  to 
impose  a  rate  of  toll  on  the  traffic  that  is  just  and  equitable 
and  that  is  a  rate  of  toll  which  will  give  a  reasonable 
return  on  the  investment. 

Let  the  United  States  treat  the  tolls  problem  of  the 
Panama  Canal  in  harmony  with  the  Golden  Rule  and  not 
view  it  in  the  spirit  of  a  refined  financial  brigand  of  which 
there  is  regretfully  some  evidence.  If  it  does  so,  it  will  ask 
the  Hague  Court  to  appoint  an  auditing  committee 
(advisory)  to  represent  the  interests  of  collective  civiliza- 
tion in  this  international  waterway.     Such  a  committee 


The  Financial  AspecU  167 

would  safeguard  the  reputation  of  the  United  States  and 
assist  the  President  in  fixing  rates,  within  the  discrctioTiary 
limit  fixed  by  the  Panama  Canal  act,  that  would  he  just 
and  equitable  to  all  parties  in  interest.  This  done,  every 
investment  interest  of  the  United  States  would  be  safe- 
guarded. The  commercial  interests  of  collective  civiliza- 
tion would  be  protected  by  fair  rates.  Lastly,  the  United 
States  would,  by  such  a  creditable  act,  give  the  world's 
peace  movement  increased  momentum  and  would  dedicate 
the  canal  "/o  the  vse  of  mankind  on  equal  terms  to  all"  as 
she  has  obligated  herself  to  do  by  irrevocable  treaty 
obligations. 


APPENDICES 


I 


CLAYTON-BULWER  TREATY  OF  APRIL,  IH.JO 

The  United  States  of  America  and  I  lor  IJritannic 
Majesty,  being  desirous  of  consolidating  the  rehitions  of 
amity  which  so  happily  subsist  between  them,  by  setting 
forth  and  fixing  in  a  convention  their  views  and  intentions 
with  reference  to  any  means  of  comnuinication  by  ship- 
canal  which  may  be  constructed  between  the  Atlantic 
and  Pacific  Oceans  by  the  way  of  the  river  San  Juan  de 
Nicaragua  and  either  or  both  of  the  lakes  of  Nicaragiui  or 
Managua,  to  any  port  or  place  on  the  Pacific  Ocean,  the 
President  of  the  United  States  has  conferred  full  powers  on 
John  M.  Clayton,  Secretary  of  State  of  the  United  States, 
and  Her  Britannic  Majesty  on  the  Right  Honorable  Sir 
Henry  Lytton  Bulwer,  a  member  of  Her  Majesty's  most 
honorable  privy  council,  knight  commander  of  the  most 
honorable  Order  of  the  Bath,  and  envoy  extraordinary 
and  minister  plenipotentiary  of  Her  Britannic  Majesty 
to  the  United  States,  for  the  aforesaid  purpose;  and  the 
said  plenipotentiaries  having  exchanged  their  full  powers, 
which  were  found  to  be  in  proper  form,  have  agreed  to  the 
foUoM'ing  articles: 

ARTICLE  I 

The  Governments  of  the  United  States  and  Great 
Britain  hereby  declare  that  neither  the  one  nor  the  other 
will  ever  obtain  or  maintain  for  itself  any  exclusive  control 
over  the  said  ship  canal;  agreeing  that  neither  will  ever 
erect  or  maintain  any  fortifications  commanding  the  sani 


172  The  Panama   Tolls  Controversy 

or  in  the  vicinity  thereof,  or  occupy,  or  fortify,  or  colonize, 
or  assume,  or  exercise  any  dominion  over  Nicaragua, 
Costa  Rica,  the  Mosquito  coast,  or  any  part  of  Central 
America;  nor  will  either  make  use  of  any  protection 
which  either  affords  or  may  afford,  or  any  alliance  which 
either  has  or  may  have  to  or  with  any  state  or  people,  for 
the  purpose  of  erecting  or  maintaining  any  such  fortifica- 
tions, or  of  occupying,  fortifying,  or  colonizing  Nicaragua, 
Costa  Rica,  the  Mosquito  coast,  or  any  part  of  Central 
America,  or  of  assuming  or  exercising  dominion  over  the 
same;  nor  will  the  United  States  or  Great  Britain  take 
advantage  of  any  intimacy,  or  use  any  alliance,  connection 
or  influence  that  either  may  possess  with  any  State  or 
Government  through  whose  territory  the  said  canal  may 
pass,  for  the  purpose  of  acquiring  or  holding,  directly  or 
indirectly,  for  the  citizens  or  subjects  of  the  one,  any  rights 
or  advantages  in  regard  to  commerce  or  navigation  through 
the  said  canal  which  shall  not  be  offered  on  the  same  terms 
to  the  citizens  or  subjects  of  the  other. 

ARTICLE  II 

Vessels  of  the  United  States  or  Great  Britain  travers- 
ing the  said  canal  shall,  in  case  of  war  between  the  con- 
tracting parties,  be  exempted  from  blockade,  detention 
or  capture  by  either  of  the  belligerents;  and  this  provision 
shall  extend  to  such  a  distance  from  the  two  ends  of  the 
said  canal  as  may  hereafter  be  found  expedient  to  establish. 

ARTICLE  III 

In  order  to  secure  the  construction  of  the  said  canal, 
the  contracting  parties  engage  that  if  any  such  canal  shall 


The  Clayton- Bui  we  r   Treaty  \1\\ 

be  undertaken  upon  fair  and  equitable  terms  by  any 
parties  having  the  authority  of  the  local  Government  or 
Governments  through  whose  territory  the  same  may  pass, 
then  the  persons  employed  in  making  the  said  canal,  and 
their  property  used,  or  to  be  used,  for  that  object,  shall 
be  protected,  from  the  commencement  of  the  said  canal 
to  its  completion,  by  the  Governments  of  the  United  States 
and  Great  Britain,  from  unjust  detention,  confiscation, 
seizure  or  any  violence  whatsoever. 

ARTICLE  IV 

The  contracting  parties  will  use  whatever  influence 
they  respectively  exercise  with  any  State,  States  or  Gov- 
ernments possessing  or  claiming  to  possess  any  jurisdic- 
tion or  right  over  the  territory  which  the  said  canal  shall 
traverse,  or  which  shall  be  near  the  waters  applicable 
thereto,  in  order  to  induce  such  States  or  Governments 
to  facilitate  the  construction  of  the  said  canal  by  every 
means  in  their  power.  And  furthermore,  the  United  States 
and  Great  Britain  agree  to  use  their  good  offices,  wherever 
or  however  it  may  be  most  expedient,  in  order  to  procure 
the  establishment  of  two  free  ports,  one  at  each  end  of  the 
said  canal. 

ARTICLE  V 

The  contracting  parties  further  engage,  that  when  the 
said  canal  shall  have  been  completed,  they  will  protect  it 
from  interruption,  seizure  or  unjust  confiscation,  and  that 
they  will  guarantee  the  neutrality  thereof,  so  that  the  said 
canal  may  forever  be  open  and  free,  and  the  capital 
invested  therein  secure.    Nevertheless,  the  Governments 


174  The  Panama   Tolls  Controversy 

of  the  United  States  and  Great  Britain,  in  according  their 
protection  to  the  construction  of  the  said  canal,  and  guar- 
anteeing its  neutrahty  and  security  when  completed, 
always  understand  that  this  protection  and  guarantee  are 
granted  conditionally,  and  may  be  withdrawn  by  both 
Governments,  or  either  Government,  if  both  Govern- 
ments, or  either  Government,  should  deem  that  the  per- 
sons or  company  undertaking  or  managing  the  same  adopt 
or  establish  such  regulations  concerning  the  traffic  there- 
upon as  are  contrary  to  the  spirit  and  intention  of  this 
convention,  either  by  making  unfair  discriminations  in 
favor  of  the  commerce  of  one  of  the  contracting  parties 
over  the  commerce  of  the  other,  or  by  imposing  oppressive 
exactions  or  unreasonable  tolls  upon  the  passengers,  ves- 
sels, goods,  wares,  merchandise  or  other  articles.  Neither 
party,  however,  shall  withdraw  the  aforesaid  protection 
and  guarantee  without  first  giving  six  months'  notice  to 
the  other. 

ARTICLE  VI 

The  contracting  parties  in  this  convention  engage  to 
invite  every  State  with  which  both  or  either  have  friendly 
intercourse  to  enter  into  stipulations  with  them  similar 
to  those  which  they  have  entered  into  with  each  other,  to 
the  end  that  all  other  States  may  share  in  the  honor  and 
advantage  of  having  contributed  to  a  work  of  such  general 
interest  and  importance  as  the  canal  herein  contemplated. 
And  the  contracting  parties  likewise  agree  that  each  shall 
enter  into  treaty  stipulations  with  such  of  the  Central 
American  States  as  they  may  deem  advisable,  for  the 
purpose  of  more  effectually  carrying  out  the  great  design 


The  Clayton- Ihdwtr   Trent ti  175 

of  this  convention,  namely,  that  of  constructing  and 
maintaining  the  said  canal  aJs  a  ship  communication 
between  the  two  oceans  for  the  benefit  of  mankind,  on 
equal  terms  to  all,  and  of  protecting  the  same;  and  they 
also  agree  that  the  good  oflBces  of  either  shall  be  emi)l<)ycd, 
when  requested  by  the  other,  in  aiding  and  assisting  the 
negotiation  of  such  treaty  stipulations;  and  should  any 
differences  arise  as  to  right  or  property  over  the  territory 
through  which  the  said  canal  shall  pass  between  the  States 
or  Governments  of  Central  America,  and  such  differences 
should  in  any  way  impede  or  obstruct  the  execution  of  the 
said  canal,  the  Governments  of  the  United  States  and 
Great  Britain  will  use  their  good  offices  to  settle  such  differ- 
ences in  the  manner  best  suited  to  promote  the  interests 
of  the  said  canal,  and  to  strengthen  the  bonds  of  friendship 
and  alliance  which  exist  between  the  contracting  parties. 

ARTICLE  VII 

It  being  desirable  that  no  time  should  be  unnecessarily 
lost  in  commencing  and  constructing  the  said  canal,  the 
Governments  of  the  United  States  and  Great  Britain 
determine  to.  give  their  support  and  encouragement  to 
such  persons  or  company  as  may  first  offer  to  commence 
the  same,  with  the  necessary  capital,  the  consent  of  the 
local  authorities,  and  on  such  principles  as  accord  with 
the  spirit  and  intention  of  this  convention;  and  if  any 
persons  or  company  should  already  have,  with  any  State 
through  which  the  proposed  ship  canal  may  pass,  a  con- 
tract for  the  construction  of  such  a  canal  as  that  specified 
in  this  convention,  to  the  stipulations  of  which  contract 
neither  of  the  contracting  parties  in  this  convention  have 


176  The  Panama  Tolls  Controversy 

any  just  cause  to  object,  and  the  said  persons  or  company 
shall  moreover  have  made  preparations  and  expended 
time,  money  and  trouble  on  the  faith  of  such  contract, 
it  is  hereby  agreed  that  such  persons  or  company  shall 
have  a  priority  of  claim  over  every  other  person,  persons 
or  company  to  the  protection  of  the  Governments  of  the 
United  States  and  Great  Britain,  and  be  allowed  a  year 
from  the  date  of  the  exchange  of  the  ratifications  of  this 
convention  for  concluding  their  arrangements,  and  pre- 
senting evidence  of  sufficient  capital  subscribed  to  accom- 
plish the  contemplated  undertaking;  it  being  understood 
that  if,  at  the  expiration  of  the  aforesaid  period,  such  per- 
sons or  company  be  not  able  to  commence  and  carry  out 
the  proposed  enterprise,  then  the  Governments  of  the 
United  States  and  Great  Britain  shall  be  free  to  afford  their 
protection  to  any  other  persons  or  company  that  shall 
be  prepared  to  commence  and  proceed  with  the  construc- 
tion of  the  canal  in  question. 

ARTICLE  VIII 

The  Governments  of  the  United  States  and  Great 
Britain  having  not  only  desired,  in  entering  into  this  con- 
vention, to  accomplish  a  particular  object,  but  also  to 
establish  a  general  principle,  they  hereby  a^ee  tq^  expend 
their  protec^tion,  by  treaty  stipulations,  to  any  other 
practicable  communications,  whether  by  canal  or  railway, 
across  the  isthmus  which  connects  North  and  South  Amer- 
ica, and  especially  to  the  interoceanic  communications, 
should  the  same  prove  to  be  practicable,  whether  by  canal 
or  railway,  which  are  now  proposed  to  be  established  by 
the  way  of  Tehuantepec  or  Panama.  In  granting,  however, 


The  Clayion-Bttlwer  Treat}/  177 

their  joint  protection  to  any  such  canals  or  railways  jis 
are  by  this  article  specified,  it  is  always  understood  hy 
the  United  States  and  Great  Britain  that  the  parties 
constructing  or  owning  the  same  shall  impose  no  other 
charges  or  conditions  of  trafiic  thereupon  than  the  afore- 
said Governments  shall  approve  of  as  just  and  equitable; 
and  that  the  same  canals  or  railways,  being  open  to  the 
citizens  and  subjects  of  the  United  States  and  Great  Britain 
on  equal  terms,  shall  also  be  open  on  like  terms  to  the 
citizens  and  subjects  of  every  other  State  which  is  willing 
to  grant  thereto  such  protection  as  the  United  States  and 
Great  Britain  engage  to  afford. 

ARTICLE  IX 

The  ratifications  of  this  convention  shall  be  exchanged 
at  Washington  within  six  months  from  this  day,  or  sooner 
if  possible. 

In  faith  whereof  we,  the  respective  plenipotentiaries, 
have  signed  this  convention  and  have  hereunto  affixed 
our  seals. 

Done  at  Washington  the  nineteenth  day  of  April, 
anno  Domini  one  thousand  eight  hundred  and  fifty. 

John  M.  Clayton.     (l.  s.) 
Henry  Lytton  Bi  lwer.  (l.  s.) 


THE  SUEZ  CANAL  TREATY 

ARTICLE  I 

The  Suez  Maritime  Canal  shall  always  be  free  and 
open,  in  time  of  war  as  in  time  of  peace,  to  every  vessel 
of  commerce  or  of  war,  without  distinction  of  flag. 

Consequently,  the  High  Contracting  Parties  agree 
not  in  any  way  to  interfere  with  the  free  use  of  the  canal, 
in  time  of  war  as  in  time  of  peace. 

The  canal  shall  never  be  subjected  to  the  exercise  of 
the  right  of  blockade. 

ARTICLE  II 

The  High  Contracting  Parties,  recognizing  that  the 
fresh-water  canal  is  indispensable  to  the  maritime  canal, 
take  note  of  the  engagements  of  His  Highness  the  Khedive 
towards  the  Universal  Suez  Canal  Company  as  regards 
the  fresh-water  canal;  which  engagements  are  stipulated 
in  a  convention  bearing  date  the  eighteenth  of  March, 
1863,  containing  an  expose  and  four  articles. 

They  undertake  not  to  interfere  in  any  way  with  the 
security  of  that  canal  and  its  branches,  the  working  of 
which  shall  not  be  exposed  to  any  attempt  at  obstruction. 

ARTICLE  III 

The  High  Contracting  Parties  likewise  undertake  to 
respect  the  plant,  establishments,  buildings  and  works 
of  the  maritime  canal  and  the  fresh-water  canal. 


The  Suez  Canal   Trcati/  17!) 

ARTICLE  IV 

The  maritime  canal  remaining  open  in  time  of  war 
as  a  free  passage,  even  to  the  ships  of  war  of  belligerents, 
according  to  the  terms  of  Article  I  of  the  present  treaty, 
the  High  Contracting  Parties  agree  that  no  right  of  war, 
no  act  of  hostility,  nor  any  act  having  for  its  ohjixrt  to 
obstruct  the  free  navigation  of  the  canal,  shall  be  com- 
mitted in  the  canals  and  its  ports  of  access,  as  well  as 
within  a  radius  of  three  marine  miles  from  these  ports, 
even  though  the  Ottoman  Empire  should  be  one  of  the 
belligerent  powers. 

Vessels  of  war  of  belligerents  shall  not  revictual  or 
take  in  stores  in  the  canal  and  its  ports  of  access,  except 
in  so  far  as  may  be  strictly  necessary.  The  transit  of  the 
aforesaid  vessels  through  the  canal  shall  be  effected  witii 
the  least  possible  delay,  in  accordance  with  the  regulations 
in  force,  and  without  any  other  intermission  than  that 
resulting  from  the  necessities  of  the  service. 

Their  stay  at  Port  Said  and  in  the  roadstead  of  Suez 
shall  not  exceed  twenty-four  hours,  except  in  case  of  dis- 
tress. In  such  case  they  shall  be  bound  to  leave  as  s(X)n  as 
possible.  An  interval  of  twenty-four  hours  shall  always 
elapse  betw^een  the  sailing  of  a  belligerent  ship  from  one 
of  the  ports  of  access  and  the  departure  of  a  ship  belonging 
to  the  hostile  power. 

ARTICLE  V 

In  time  of  war  belligerent  powers  shall  not  disembark 
nor  embark  within  the  canal  and  its  ports  of  access  either 
troops,  munitions  or  materials  of  war.  But  in  case  of  an 
accidental  hindrance  in  the  canal,  men  may  be  embarked 


1S(>  The  Pan  am  a   Tollff  Controversy 

or  disembarked  at  the  ports  of  access  by  detachments 
not  exceeding  one  thousand  men,  with  a  corresponding 
amount  of  war  material. 

ARTICLE  VI 

Prizes  shall  be  subjected,  in  all  respects,  to  the  same 
rules  as  the  vessels  of  belligerents. 

ARTICLE  VII 

The  powers  shall  not  keep  any  vessel  of  war  in  the 
waters  of  the  canal  (including  Lake  Timsah  and  the  Bitter 
Lakes). 

Nevertheless,  they  may  station  vessels  of  war  in  the 
ports  of  excess  of  Port  Said  and  Suez,  the  number  of  which 
shall  not  exceed  two  for  each  power. 

This  right  shall  not  be  exercised  by  belligerents. 

ARTICLE  VIII 

The  agents  in  Egypt  of  the  Signatory  Powers  of  the 
present  treaty  shall  be  charged  to  watch  over  its  execution. 
In  case  of  any  event  threatening  the  security  or  the  free 
passage  of  the  canal,  they  shall  meet  on  the  summons  of 
three  of  their  number  under  the  presidency  of  their 
Doyen,  in  order  to  proceed  to  the  necessary  verifications. 
They  shall  inform  the  Khedival  Government  of  the  danger 
of  which  they  may  have  perceived,  in  order  that  that 
Government  may  take  proper  steps  to  insure  the  protec- 
tion and  the  free  use  of  the  canal.  Under  any  circum- 
stances, they  shall  meet  once  a  year  to  take  note  of  the  due 
execution  of  the  treaty. 

The  last-mentioned  meetings  shall  take  place  under 


The  Suez  Conul   Treaiif  ISl 

the  presidency  of  a  Special  ComniissioiuM-  noininatt-d  for 
that  purpose  by  the  Imperial  Ottoman  Governmciil.  A 
Commissioner  of  the  Khedive  may  also  take  part  in  llic 
meeting,  and  may  preside  over  it  in  case  of  the  alisnice 
of  the  Ottoman  Commissioner. 

They  shall  especially  demand  the  suppression  of  any 
work  or  the  dispersion  of  any  assemblage  on  either  bank 
of  the  canal,  the  object  or  effect  of  which  might  l)e  to 
interfere  with  the  liberty  and  the  entire  security  of  the 
navigation. 

ARTICLE  IX 

The  Egyptian  Government  shall,  within  the  limits 
of  its  powers  resulting  from  the  Firmans,  and  under  the 
conditions  provided  for  in  the  present  treaty,  take  the 
necessary  measures  for  insuring  the  execution  of  the 
said  treaty. 

In  case  the  Egyptian  Government  should  not  have 
sufficient  means  at  its  disposal,  it  shall  call  upon  the 
Imperial  Ottoman  Government,  which  shall  take  the 
necessary  measures  to  respond  to  such  appeal:  shall  give 
notice  thereof  to  the  Signatory  Powers  of  the  Declaration 
of  London  of  the  seventeenth  of  March,  188.5;  and  shall. 
if  necessary,  concert  with  them  on  the  subject. 

The  provisions  of  Articles  IV,  V.  VII  and  VIII  shall 
not  interfere  with  the  measures  which  shall  be  taken  in 
virtue  of  the  present  article. 

ARTICLE  X 
Similarly,  the  provisions  of  Articles  IV,  V,  VII  and 
VIII  shall  not  interfere  with  the  measures  which   His 
Majesty  the  Sultan  and  His  Highness  the  Khedive,  in 


182  The  Panama   Tolls  Controversy 

the  name  of  His  Imperial  Majesty,  and  within  the  limits 
of  the  Firmans  granted,  might  find  it  necessary  to  take  ' 
for  securing  by  their  own  forces  the  defence  of  Egypt  and 
the  maintenance  of  public  order. 

In  case  His  Imperial  Majesty  the  Sultan,  or  His 
Highness  the  Khedive,  should  find  it  necessary  to  avail 
themselves  of  the  exceptions  for  which  this  article  provides, 
the  Signatory  Powers  of  the  Declaration  of  London  shall 
be  notified  thereof  by  the  Imperial  Ottoman  Government. 

It  is  likewise  understood  that  the  provisions  of  the 
four  articles  aforesaid  shall  in  no  case  occasion  any  ob- 
stacle to  the  measures  which  the  Imperial  Ottoman  Gov-  " 
ernment  may  think  it  necessary  to  take  in  order  to  insure 
by  its  own  forces  the  defence  of  its  other  possessions 
situated  on  the  eastern  coast  of  the  Red  Sea. 

ARTICLE  XI 

The  measures  which  shall  be  taken  in  the  cases  pro- 
vided for  by  Articles  IX  and  X  of  the  present  treaty  shall 
not  interfere  with  the  free  use  of  the  canal.  In  the  same 
cases,  the  erection  of  permanent  fortifications  contrary 
to  the  provisions  of  Article  VIII  is  prohibited. 

ARTICLE  XII 

The  High  Contracting  Parties,  by  application  of  the 
principle  of  equality  as  regards  the  free  use  of  the  canal, 
a  principle  which  forms  one  of  the  bases  of  the  present 
treaty,  agree  that  none  of  them  shall  endeavour  to  obtain 
with  respect  to  the  canal  territorial  or  commercial  advan- 
tages   or    privileges  in    any  international    arrangements 


The  Suez  Caiial  Treaiji  188 

which  may  be  conchided.    Moreover,  the  rights  of  Turkey 
as  the  territorial  power  are  reserved. 

ARTICLE  XIII 

With  the  exception  of  the  obligations  expressly  pro- 
vided by  the  clauses  of  the  present  treaty,  the  sovereign 
rights  of  His  Imperial  Majesty  the  Sultan,  and  the  rights 
and  immunities  of  His  Highness  the  Khedive,  resulting 
from  the  Firmans,  are  in  no  way  affected. 

ARTICLE  XIV 

The  High  Contracting  Parties  agree  that  the  engage- 
ments resulting  from  the  present  treaty  shall  not  be 
limited  by  the  duration  of  the  Acts  of  Concession  of  the 
Universal  Suez  Canal  Company. 

ARTICLE  XV 

The  stipulations  of  the  present  treaty  shall  not  inter- 
fere with  the  sanitary  measures  in  force  in  Egypt. 

ARTICLE  XVI 

The  High  Contracting  Parties  undertake  to  bring 
the  present  treaty  to  the  knowledge  of  the  States  which 
have  not  signed  it,  inviting  them  to  accede  to  it. 

ARTICLE  XVII 

The  present  treaty  shall  be  ratified,  and  the  ratifica- 
tions shall  be  exchanged  at  Constantinople  within  the 
space  of  one  month,  or  sooner,  if  possible. 


184  The  Panama  Tolls  Controversy 

In  faith  of  which  the  respective  plenipotentiaries  have 
signed  the  present  treaty,  and  have  aflfixed  to  it  the  seal 
of  their  arms. 

Done  at  Constantinople,  the  twenty-ninth  day  of  the 
month  of  October,  in  the  year  1888. 

(Signed  by  Representatives  of  Great  Britain,  Ger- 
many, Austria,  Spain,  France,  Italy,  Netherlands,  Russia 
and  Turkey.) 


THE   HAY-PAUNCEFOTE   TREATY   OF    \m) 

Showing  the  original  treaty  and  the  treaty  as  aiiuMulcd 
in  one  as  follows : 

(1)  Amendments  by  the  United  States  Senate  arc 
printed  in  italics. 

(2)  Article  III,  stricken  out  by  the  United  States 
Senate,  is  printed  in  brackets. 


The  United  States  of  America  and  Her  Majesty  the 
Queen  of  the  United  Kingdom  of  Great  Britain  and  Ire- 
land, Empress  of  India,  being  desirous  to  facilitate  the 
construction  of  a  ship  canal  to  connect  the  Atlantic  and 
Pacific  Oceans,  and  to  that  end  to  remove  any  objection 
which  may  arise  out  of  the  convention  of  April  19,  1850, 
commonly  called  the  Clayton-Bulwer  treaty,  to  the  con- 
struction of  such  canal  under  the  auspices  of  the  Govern- 
ment of  the  United  States,  without  impairing  the  "general 
principle"  of  neutralization  established  in  Article  VIII 
of  that  convention,  have  for  that  purpose  appointed  as 
their  plenipotentiaries : 

The  President  of  the  United  States,  John  Hay. 
Secretary  of  State,  of  the  United  States  of  America; 

And  Her  Majesty  the  Queen  of  Great  Britain  and 
Ireland,  Empress  of  India,  The  Right  Honorable  Lord 
Pauncefote,  G.  C.  B.,  G.  C.  M.  G.,  Her  Majesty's  Am- 
bassador Extraordinary  and  Plenipotentiary  to  the 
United  States; 


186  The  Panama   Tolls  Controversy 

Who,  having  communicated  to  each  other  their  full 
powers,  which  were  found  to  be  in  due  and  proper  form, 
have  agreed  upon  the  following  articles: 

ARTICLE  1 

It  is  agreed  that  the  canal  may  be  constructed  under 
the  auspices  of  the  Government  of  the  United  States, 
either  directly  at  its  own  cost  or  by  gift  or  loan  of  money 
to  individuals  or  corporations  or  through  subscription  to 
or  purchase  of  stock  or  shares,  and  that,  subject  to  the 
provisions  of  the  present  convention,  the  said  Government 
shall  have  and  enjoy  all  the  rights  incident  to  such  con- 
struction, as  well  as  the  exclusive  right  of  providing  for 
the  regulation  and  management  of  the  canal. 

ARTICLE  II 

The  High  Contracting  Parties,  desiring  to  preserve 
and  maintain  the  "general  principle"  of  neutralization 
established  in  Article  VIII  of  the  Clayton-Bulwer  conven- 
tion, which  convention  is  hereby  superseded,  adopt,  as  the 
basis  of  such  neutralization,  the  following  rules,  sub- 
stantially as  embodied  in  the  convention  between  Great 
Britain  and  certain  other  powers,  signed  at  Constantinople 
October  29,  1888,  for  the  Free  Navigation  of  the  Suez 
Maritime  Canal,  that  is  to  say : 

1.  The  canal  shall  be  free  and  open,  in  time  of  war 
as  in  time  of  peace,  to  the  vessels  of  commerce  and  of  war 
of  all  nations,  on  terms  of  entire  equality,  so  that  there 
shall  be  no  discrimination  against  any  nation  or  its  citi- 
zens or  subjects  in  respect  of  the  conditions  or  charges  of 
traffic,  or  otherwise. 


The  Hay-Paunccjoic   Treaii/  of  10(H)  1S7 

2.  The  canal  shall  never  he  hlockaded,  luir  sliall  any 
right,  of  war  be  exercised  nor  any  act  of  hostility  he 
committed  within  it. 

3.  Vessels  of  war  of  a  belligerent  shall  not  rcvictual 
nor  take  any  stores  in  the  canal  except  so  far  as  may  he 
strictly  necessary;  and  the  transit  of  such  vessels  through 
the  canal  shall  be  effected  with  the  least  possible  delay, 
in  accordance  with  the  regulations  in  force,  and  with  only 
such  intermission  as  may  result  from  the  necessities  of 
the  service. 

Prizes  shall  be  in  all  respects  subject  to  the  same  rules 
as  vessels  of  war  of  the  belligerents. 

4.  No  belligerent  shall  embark  or  disembark  troops, 
munitions  of  war  or  warlike  materials  in  the  canal  except 
in  case  of  accidental  hindrance  of  the  transit,  and  in  such 
case  the  transit  shall  be  resumed  with  all  possible  despatch. 

5.  The  provisions  of  this  article  shall  apjjly  to  waters 
adjacent  to  the  canal,  within  three  marine  miles  of  either 
end.  Vessels  of  war  of  a  belligerent  shall  not  remain  in 
such  waters  longer  than  twenty-four  hours  at  any  one  time 
except  in  case  of  distress,  and  in  such  case  shall  depart  a.s 
soon  as  possible;  but  a  vessel  of  war  of  one  belligerent 
shall  not  depart  within  twenty-four  hours  from  the  de- 
parture of  a  vessel  of  war  of  the  other  belligerent. 

It  is  agreed,  however,  that  none  of  the  immediatcb/ 
foregoing  conditions  and  stipidations  in  sections  numbered 
one,  two,  three,  four  and  five  of  this  article  shall  apply  to 
measures  which  the  United  States  may  find  it  necessary  to 
take  for  securing  by  its  own  forces  the  defense  of  the  United 
States  and  the  maintenance  of  public  order. 

6.  The  plant,  establishments,  buildings  and  all  works 


188  The  Panama  Tolls  Controversy 

necessary  to  the  construction,  maintenance  and  operation 
of  the  canal  shall  be  deemed  to  be  part  thereof,  for  the  pur- 
poses of  this  convention,  and  in  time  of  war  as  in  time  of 
peace  shall  enjoy  complete  immunity  from  attack  or  in- 
jury by  belligerents  and  from  acts  calculated  to  impair 
their  usefulness  as  part  of  the  canal. 

7.  No  fortifications  shall  be  erected  commanding 
the  canal  or  the  waters  adjacent.  The  United  States, 
however,  shall  be  at  liberty  to  maintain  such  military 
police  along  the  canal  as  may  be  necessary  to  protect  it 
against  lawlessness  and  disorder. 

[ARTICLE  III] 

[The  High  Contracting  Parties  will,  immediately 
upon  the  exchange  of  the  ratifications  of  this  convention, 
bring  it  to  the  notice  of  the  other  powers  and  invite  them 
to  adhere  to  it.] 

ARTICLE  IV 

The  present  convention  shall  be  ratified  by  the  Presi- 
dent of  the  United  States,  by  and  with  the  advice  and 
consent  of  the  Senate  thereof,  and  by  Her  Britannic 
Majesty;  and  the  ratifications  shall  be  exchanged  at 
Washington  or  at  London  within  six  months  from  the  date 
hereof,  or  earlier  if  possible. 

In  faith  whereof  the  respective  plenipotentiaries  have 
signed  this  convention  and  thereunto  affixed  their  seals. 

Done  in  duplicate  at  Washington  the  fifth  day  of 
February  in  the  year  of  our  Lord  one  thousand  nine 
hundred. 

John  Hay. 
Pauncefote. 


THE    HAY-PAUNCEFOTE   TREATY   OF    lOOl 

The  United  States  of  America  and  Ilis  ^Fajesty 
Edward  the  Seventh,  of  the  United  Kingdom  of  (Ireat 
Britain  and  Ireland,  and  of  the  British  Dominions  beycMid 
the  Seas,  King,  and  Emperor  of  India,  being  desirous  to 
facihtate  the  construction  of  a  ship  canal  to  connect  the 
Atlantic  and  Pacific  Oceans,  by  whatever  route  may  be 
considered  expedient,  and  to  that  end  to  remove  any 
objection  which  may  arise  out  of  the  convention  of  the 
nineteenth  of  April,  1850,  commonly  called  the  Clayton- 
Bulwer  treaty,  to  the  construction  of  such  canal  under  the 
auspices  of  the  Government  of  the  United  States,  without 
impairing  the  "general  principle"  of  neutralization  estab- 
lished in  Article  VIII  of  that  convention,  have  for  that 
purpose  appointed  as  their  plenipotentiaries: 

The  President  of  the  United  States,  John  Hay, 
Secretary  of  State  of  the  United  States  of  America; 

And  His  Majesty  Edward  the  Seventh,  of  the  United 
Kingdom  of  Great  Britain  and  Ireland,  and  of  the  lirilish 
Dominions  beyond  the  Seas,  King,  and  Emperor  of 
India,  the  Right  Honourable  Lord  Pauncefote,  G.  G.  B., 
G.  C.  M.  G.,  His  Majesty's  Ambassador  Extraordinary 
and  Plenipotentiary  to  the  United  States; 

Who,  having  communicated  to  each  other  their  full 
powers,  which  were  found  to  be  in  due  and  proper  form, 
have  agreed  upon  the  following  articles: 


190  The  Panama   Tolls  Controversy 

ARTICLE  I 

The  High  Contracting  Parties  agree  that  the  present 
treaty  shall  supersede  the  afore-mentioned  convention 
of  the  nineteenth  of  April,  1850. 

ARTICLE  II 

It  is  agreed  that  the  canal  may  be  constructed  under 
the  auspices  of  the  Government  of  the  United  States  either 
directly  at  its  own  cost,  or  by  gift  or  loan  of  money  to 
individuals  or  corporations,  or  through  subscription  to 
or  purchase  of  stock  or  shares,  and  that,  subject  to  the 
provisions  of  the  present  treaty,  the  said  Government 
shall  have  and  enjoy  all  the  rights  incident  to  such  con- 
struction, as  well  as  the  exclusive  right  of  providing  for 
the  regulation  and  management  of  the  canal. 

ARTICLE  III 

The  United  States  adopts,  as  the  basis  of  the  neu- 
tralization of  such  ship  canal,  the  following  rules,  sub- 
stantially as  embodied  in  the  convention  of  Constantinople 
signed  the  twenty-eighth  of  October,  1888,  for  the  free 
navigation  of  the  Suez  Canal,  that  is  to  say : 

1.*  The  canal  shall  be  free  and  open  to  the  vessels  of 
commerce  and  of  war  of  all  nations  observing  these  rules,  < 
on  terms  of  entire  equality,  so  that  there  shall  be  no  dis- 
crimination against  any  such  nation,  or  its  citizens  or  sub- 
jects, in  respect  of  the  conditions  or  charges  of  traffic  or 
otherwise.  Such  conditions  and  charges  of  traffic  shall  be 
just  and  equitable. 

2.  The  canal  shall  never  be  blockaded,  nor  shall  any 


llie   Han-Paiiuccfotc   Tratij/  of  I9<il  \U\ 

right  of  war  be  exercised  uor  any  act  of  hostility  ho  com- 
mitted within  it.  The  United  States,  however,  shall  he 
at  liberty  to  maintain  such  military  police  along  the  canal 
as  may  be  necessary  to  protect  it  against  lawlessness  and 
disorder. 

3.  Vessels  of  war  of  a  belligerent  shall  not  revMctual 
nor  take  any  stores  in  the  canal  except  so  far  as  may  be 
strictly  necessary;  and  the  transit  of  snch  vessels  through 
the  canal  shall  be  effected  with  the  least  possible  delay  in 
accordance  with  the  regulations  in  force,  and  with  only 
such  intermission  as  may  result  from  the  necessities  of 
the  service. 

Prizes  shall  be  in  all  respects  subject  to  the  same  rules 
as  vessels  of  war  of  the  belligerents. 

4.  No  belligerent  shall  embark  or  disembark  troojjs, 
miMiitions  of  war,  or  warlike  materials  in  the  canal,  except 
in  case  of  accidental  hindrance  of  the  transit,  and  in  such 
case  the  transit  shall  be  resumed  with  all  possible  dispatch. 

5.  The  provisions  of  this  article  shall  apply  to  waters 
adjacent  to  the  canal,  within  three  marine  miles  of  either 
end.  Vessels  of  war  of  a  belligerent  shall  not  remain  in 
such  waters  longer  than  twenty-four  hours  at  any  one  time, 
except  in  case  of  distress,  and  in  such  case  shall  depart  as 
soon  as  possible;  but  a  vessel  of  war  of  one  belligerent 
shall  not  depart  within  twenty-four  hours  from  the  de- 
parture of  a  vessel  of  war  of  the  other  belligerent. 

6.  The  plant,  establishments,  buildings  and  all  works 
necessary  to  the  construction,  maintenance  aTid  operation 
of  the  canal  shall  be  deemed  to  be  part  thereof,  for  the 
purposes  of  this  treaty,  and  in  time  of  war,  as  in  time  of 
peace,   shall  enjoy  complete   immunity   from   attack   or 


192  The  Panama   Tolls  Controversy 

injury  by  belligerents,  and  from  acts  calculated  to  impair 
their  usefulness  as  part  of  the  canal. 

ARTICLE  IV 

It  is  agreed  that  no  change  of  territorial  sovereignty 
or  of  international  relations  of  the  country  or  counties 
traversed  by  the  before-mentioned  canal  shall  affect  the 
general  principle  of  neutralization  or  the  obligation  of  the 
High  Contracting  Parties  under  the  present  treaty. 

ARTICLE  V 

The  present  treaty  shall  be  ratified  by  the  President 
of  the  United  States,  by  and  with  the  advice  and  consent 
of  the  Senate  thereof,  and  by  His  Britannic  Majesty;  and 
the  ratifications  shall  be  exchanged  at  Washington  or  at 
London  at  the  earliest  possible  time  within  six  months 
from  the  date  hereof. 

In  faith  whereof  the  respective  plenipotentiaries  have 
signed  this  treaty  and  hereunto  affixed  their  seals. 

Done  in  duplicate  at  Washington,  the  eighteenth  day 
of  November,  in  the  year  of  our  Lord  one  thousand  nine 
hundred  and  one. 

John  Hay.      (seal.) 

PAUNCEFOTE.  (SEAL.) 


TREATY   WITH    PANAMA 

A  CONVENTION  BETWEEN  THE  UNITED  STATES  AND  THE 
REPUBLIC  OF  PANAMA  FOR  THE  CONSTRUCTION  OF  A 
SHIP  CANAL  TO  CONNECT  THE  WATERS  OF  THE  ATLANTIC 
AND  PACIFIC  OCEANS.  SIGNED  NOVEMBER  18,  1903 

The  United  States  of  America  and  the  RepubUc  of 
Panama  being  desirous  to  insure  the  construction  of  a  ship 
canal  across  the  Isthmus  of  Panama  to  connect  the 
Atlantic  and  Pacific  Oceans,  and  the  Congress  of  the 
United  States  of  America  having  passed  an  act  approved 
June  28,  1902,  in  furtherance  of  that  object,  by  which  the 
President  of  the  United  States  is  authorized  to  acquire 
within  a  reasonable  time  the  control  of  the  necessary  terri- 
tory of  the  Republic  of  Colombia,  and  the  sovereignty 
of  such  territory  being  actually  vested  in  the  Republic  of 
Panama,  the  High  Contracting  Parties  have  resolved  for 
that  purpose  to  conclude  a  Convention  and  have  accord- 
ingly appointed  as  their  plenipotentiaries, — 

The  President  of  the  United  States  of  America,  John 
Hay,  Secretary  of  State,  and 

The  Government  of  the  Republic  of  Panama,  Pliili[)pc 
Bunau-Varilla,  Envoy  Extraordinary  and  Minister  Pleni- 
potentiary of  the  Republic  of  Panama,  thereunto  specially 
empowered  by  said  Government,  who  after  communicat- 
ing with  each  other  their  respective  full  powers,  found  to 
be  in  good  and  due  form,  have  agreed  upon  and  concluded 
the  following  articles: 

193 


194  The  Panama   Tolls  Controversy 

ARTICLE  I 

The  United  States  guarantees  and  will  maintain  the 
independence  of  the  Republic  of  Panama. 

ARTICLE  II 

The  Republic  of  Panama  grants  to  the  United  States 
in  perpetuity  the  use,  occupation  and  control  of  a  zone 
of  land  and  land  under  water  for  the  construction,  main- 
tenance, operation,  sanitation  and  protection  of  said  canal 
of  the  width  of  ten  miles  extending  to  the  distance  of  five 
miles  on  each  side  of  the  center  line  of  the  route  of  the  canal 
to  be  constructed;  the  said  zone  beginning  in  the  Carib- 
bean Sea,  three  marine  miles  from  mean  low  water  mark, 
and  extending  to  and  across  the  Isthmus  of  Panama  into 
the  Pacific  Ocean  to  a  distance  of  three  marine  miles  from 
mean  low  water  mark,  with  the  proviso  that  the  cities  of 
Panama  and  Colon  and  the  harbors  adjacent  to  said  cities, 
which  are  included  within  the  boundaries  of  the  zone 
above  described,  shall  not  be  included  within  this  grant. 
The  Republic  of  Panama  further  grants  to  the  United 
States  in  perpetuity  the  use,  occupation  and  control  of 
any  other  lands  and  waters  outside  of  the  zone  above  de- 
scribed which  may  be  necessary  and  convenient  for  the 
construction,  maintenance,  operation,  sanitation  and  pro- 
tection of  the  said  canal  or  of  any  auxiliary  canals  or  other 
works  necessary  and  convenient  for  the  construction, 
maintenance,  operation,  sanitation  and  protection  of  the 
said  enterprise. 

The  Republic  of  Panama  further  grants  in  like  manner 
to  the  United  States  in  perpetuity  all  islands  within  the 


Treat}/   irith    I'nnnina  I!).") 

limits  of  the  zone  above  described  and  in  adtlilion  thereto 
the  group  of  small  islands  in  the  Bay  of  Panama,  named 
Perico,  Naos,  Culebra  and  Flamenco. 

ARTICLE  III 

The  Republic  of  Panama  grants  to  the  United  States 
all  the  rights,  power  and  authority  within  the  zone  men- 
tioned and  described  in  Article  II  of  this  agreement  and 
within  the  limits  of  all  auxiliary  lands  and  waters  men- 
tioned and  described  in  said  Article  II  which  the  United 
States  would  possess  and  exercise  if  it  were  the  sovereign 
of  the  territory  within  which  said  lands  and  waters  are 
located  to  the  entire  exclusion  of  the  exercise  by  the  Re- 
public of  Panama  of  any  such  sovereign  rights,  power  or 
authority. 

ARTICLE  IV 

As  rights  subsidiary  to  the  above  grants  the  Republic 
of  Panama  grants  in  perpetuity  to  the  United  States  the 
right  to  use  the  rivers,  streams,  lakes  and  other  bodies  of 
water  within  its  limits  for  navigation,  the  supply  of  water 
or  water-power  or  other  purposes,  so  far  as  the  use  of  said 
rivers,  streams,  lakes  and  bodies  of  water  and  the  waters 
thereof  may  be  necessary  and  convenient  for  the  construc- 
tion, maintenance,  operation,  sanitation  and  protection  of 
the  said  canal. 

ARTICLE  \- 

The.  Republic  of  Panama  grants  to  the  United  States 
in  perpetuity  a  monopoly  for  the  construction,  mainten- 
ance and  operation  of  any  system  of  communication  by 


196  The  Pa7iama  Tolls  Controversy 

means  of  canal  or  railroad  across  its  territory  between  the 
Caribbean  Sea  and  the  Pacific  Ocean. 

ARTICLE  VI 
The  grants  herein  contained  shall  in  no  manner  in- 
vahdate  the  titles  or  rights  of  private  land  holders  or  own- 
ers of  private  property  in  the  said  zone  or  in  or  to  any  of 
the  lands  or  waters  granted  to  the  United  States  by  the 
provisions  of  any  article  of  this  treaty,  nor  shall  they  inter- 
fere with  the  rights  of  way  over  the  public  roads  passing 
through  the  said  zone  or  over  any  of  the  said  lands  or 
waters  unless  said  rights  of  way  or  private  rights  shall 
conflict  with  rights  herein  granted  to  the  United  States 
in  which  case  the  rights  of  the  United  States  shall  be 
superior.  All  damages  caused  to  the  owners  of  private 
lands  or  private  property  of  any  kind  by  reason  of  the 
grants  contained  in  this  treaty  or  by  reason  of  the  opera- 
tions of  the  United  States,  its  agents  or  employees,  or  by 
reason  of  the  construction,  maintenance,  operation, 
sanitation  and  protection  of  the  said  canal  or  of  the  works 
of  sanitation  and  protection  herein  provided  for,  shall  be 
appraised  and  settled  by  a  joint  commission  appointed 
by  the  Governments  of  the  United  States  and  of  the  Re- 
public of  Panama,  whose  decisions  as  to  such  damages 
shall  be  final  and  whose  awards  as  to  such  damages  shall 
be  paid  solely  by  the  United  States.  No  part  of  the  work 
on  said  canal  or  the  Panama  railroad  or  on  any  auxiliary 
works  relating  thereto  and  authorized  by  the  terms  of 
this  treaty  shall  be  prevented,  delayed  or  impeded  by  or 
pending  such  proceedings  to  ascertain  such  damages. 
The  appraisal  of  said  private  lands  and  private  property 


Treaty  with   Panama  197 

and  the  assessment  of  damages  to  them  shall  be  based 
upon  their  value  before  the  date  of  this  convention. 

xVRTICLE  VII 
The  Republic  of  Panama  grants  to  the  United  States 
within  the  limits  of  the  cities  of  Panama  and  Colon  and 
their  adjacent  harbors  and  within  the  territory  adjacent 
thereto  the  right  to  acquire  by  purchase  or  by  the  exercise 
of  the  right  of  eminent  domain,  any  lands,  buildings, 
water  rights  or  other  properties  necessary  and  convenient 
for  the  construction,  maintenance,  operation  and  pro- 
tection of  the  canal  and  of  any  works  of  sanitation,  such  as 
the  collection  and  disposition  of  sewage  and  the  distribu- 
tion of  water  in  the  said  cities  of  Panama  and  Colon,  which, 
in  the  discretion  of  the  United  States  may  be  necessarj' 
and  convenient  for  the  construction,  maintenance,  opera- 
tion, sanitation  and  protection  of  the  said  canal  and 
railroad.  All  such  works  of  sanitation,  collection  and  dis- 
postion  of  sewage  and  distribution  of  water  in  the  cities 
of  Panama  and  Colon  shall  be  made  at  the  expense  of  the 
United  States,  and  the  Government  of  the  United  States, 
its  agents  or  nominees  shall  be  authorized  to  impose  and 
collect  water  rates  and  sewerage  rates  which  shall  be  suffi- 
cient to  provide  for  the  payment  of  interest  and  the  amor- 
tization of  the  principal  of  the  cost  of  said  works  within  a 
period  of  fifty  years  and  upon  the  expiration  of  said  term 
of  fifty  years  the  system  of  sewers  and  water  works  shall 
revert  to  and  become  the  properties  of  the  cities  of  Panama 
and  Colon  respectively,  and  the  use  of  the  water  shall  be 
free  to  the  inhabitants  of  Panama  and  Colon,  except  to 
the  extent   that   water  rates  may  be  necessary  for  the 


198  The  Panama   Tolls  Controversy 

operation  and  maintenance  of  said  system  of  sewers  and 
v.aters. 

The  Republic  of  Panama  agrees  that  the  cities  of 
Panama  and  Colon  shall  comply  in  perpetuity  with  the 
sanitary  ordinances  whether  of  a  preventive  or  curative 
character  prescribed  by  the  United  States  and  in  case  the 
Government  of  Panama  is  unable  or  fails  in  its  duty  to 
enforce  this  compliance  by  the  cities  of  Panama  and  Colon 
with  the  sanitary  ordinances  of  the  United  States  the 
Republic  of  Panama  grants  to  the  United  States  the  right 
and  authority  to  enforce  the  same. 

The  same  right  and  authority  are  granted  to  the 
United  States  for  the  maintenance  of  public  order  in  the 
cities  of  Panama  and  Colon  and  the  territories  and  harbors 
adjacent  thereto  in  case  the  RepubUc  of  Panama  should 
not  be,  in  the  judgment  of  the  United  States,  able  to 
maintain  such  order. 

ARTICLE  VIII 

The  Republic  of  Panama  grants  to  the  United  States 
all  rights  which  it  now  has  or  hereafter  may  acquire  to 
the  property  of  the  New  Panama  Canal  Company  and  the 
Panama  Railroad  Company  as  a  result  of  the  transfer 
of  sovereignty  from  the  Republic  of  Colombia  to  the  Re- 
public of  Panama  over  the  Isthmus  of  Panama  and  author- 
izes the  New  Panama  Canal  Company  to  sell  and  transfer 
to  the  United  States  its  rights,  privileges,  properties  and 
concessions  as  well  as  the  Panama  Railroad  and  all  the 
shares  or  part  of  the  shares  of  that  company;  but  the 
public  lands  situated  outside  of  the  zone  described  in 
Article  II  of  this  treaty  now  included  in  the  concessions  to 


Treat  If  iriili   Panama  100 

both  said  enterprises  and  not  required  in  the  construction 
or  operation  of  the  canal  shall  revert  to  the  Republic  of 
Panama  except  any  property  now  owned  by  or  in  the 
possession  of  said  companies  within  Panama  or  Colon  or 
the  ports  or  terminals  thereof. 

ARTICLE  IX 

The  United  States  agrees  that  the  ports  at  either 
entrance  of  the  canal  and  the  waters  thereof  and  the 
Republic  of  Panama  agrees  that  the  towns  of  Panama  and 
Colon  shall  be  free  for  all  time  so  that  there  shall  not  be 
imposed  or  collected  custom  house  tolls,  tonnage,  anchor- 
age, lighthouse,  wharf,  pilot  or  quarantine  dues  or  any 
other  charges  or  taxes  of  any  kind  upon  any  vessel  using 
or  passing  through  the  canal  or  belonging  to  or  emi)loyed 
by  the  United  States,  directly  or  indirectly,  in  connection 
with  the  construction,  maintenance,  operation,  sanitation 
and  protection  of  the  main  canal,  or  auxiliary  works,  or 
upon  the  cargo,  officers,  crew  or  passengers  of  any  such 
vessels,  except  such  tolls  and  charges  as  may  be  imposed 
by  the  United  States  for  the  use  of  the  canal  and  other 
works,  and  except  tolls  and  charges  imposed  by  the 
Republic  of  Panama  upon  merchandise  destined  to  be 
introduced  for  the  consumption  of  the  rest  of  the  Republic 
of  Panama,  and  upon  vessels  touching  at  the  ports  of 
Colon  and  Panama  and  which  do  not  cross  the  canal. 

The  Government  of  the  Republic  of  Pananui  shall 
have  the  right  to  establish  in  such  ports  and  in  the  towns 
of  Panama  and  Colon  .such  houses  and  guards  as  it  may 
deem  necessary  to  collect  duties  on  importations  destined 
to  other  portions  of  Panama  and  to  prevent  contraband 


200  The  Panama  Tolls  Controversy 

trade.  The  United  States  shall  have  the  right  to  make 
use  of  the  towns  and  harbors  of  Panama  and  Colon  as 
places  of  anchorage,  and  for  making  repairs,  for  loading, 
unloading,  depositing  or  trans-shipping  cargoes  either  in 
transit  or  destined  for  the  service  of  the  canal  and  for  other 
works  pertaining  to  the  canal. 

ARTICLE  X 

The  Republic  of  Panama  agrees  that  there  shall  not 
be  imposed  any  taxes,  national,  municipal,  departmental 
or  of  any  other  class  upon  the  canal,  the  railways  and  auxil- 
iary works,  tugs  and  other  vessels  employed  in  the  service 
of  the  canal,  storehouses,  workshops,  offices,  quarters  for 
laborers,  factories  of  all  kinds,  warehouses,  wharves, 
machinery  and  other  works,  property,  and  effects  apper- 
taining to  the  canal  or  railroad  and  auxiliary  works,  or 
their  officers  or  employees,  situated  within  the  cities  of 
Panama  and  Colon,  and  that  there  shall  not  be  imposed 
contributions  or  charges  of  a  personal  character  of  any 
kind  upon  officers,  employees,  laborers  and  other  individ- 
uals in  the  service  of  the  canal  and  railroad  and  auxiliary 
works. 

ARTICLE  XI 

The  United  States  agrees  that  the  official  dispatches 
of  the  Government  of  the  Republic  of  Panama  shall  be 
transmitted  over  any  telegraph  and  telephone  lines 
established  for  canal  purposes  and  used  for  public  and 
private  business  at  rates  not  higher  than  those  required 
from  officials  in  the  service  of  the  United  States. 


Treaty  icUh  Panama  201 

ARTICLE  XII 

The  Government  of  the  Republic  of  Panama  shall 
permit  the  immigration  and  free  access  to  the  lands  and 
workshops  of  the  canal  and  its  auxiliary  works  of  all  em- 
ployees and  workmen  of  whatever  nationality  under  con- 
tract to  work  upon  or  seeking  employment  upon  or  in  any 
wise  connected  with  the  said  canal  and  its  auxiliary  works, 
with  their  respective  families  and  all  such  persons  shall  be 
free  and  exempt  from  the  military  service  of  the  Republic 
of  Panama. 

ARTICLE  XIII 

The  United  States  may  import  at  any  time  into  the 
said  zone  and  auxiliary  lands,  free  of  custom  duties,  im- 
posts, taxes  or  other  charges,  and  without  any  restrictions, 
any  and  all  vessels,  dredges,  engines,  cars,  machinery, 
tools,  explosives,  materials,  supplies  and  other  articles 
necessary  and  convenient  in  the  construction,  mainten- 
ance, operation,  sanitation  and  protection  of  the  canal 
and  auxiliary  works,  and  all  provisions,  medicines,  cloth- 
ing, supplies  and  other  things  necessary  and  convenient 
for  the  officers,  employees,  workmen  and  laborers  in  the 
service  and  employ  of  the  United  States  and  for  their  fami- 
lies. If  any  such  articles  are  disposed  of  for  use  outside 
of  the  zone  and  auxihary  lands  granted  to  the  United  States 
and  within  the  territory  of  the  Republic;  they  shall  be 
subject  to  the  same  import  or  other  duties  as  like  articles 
imported  under  the  laws  of  the  Republic  of  Panama. 

ARTICLE  XIV 
As  the  price  or  compensation  for  the  rights,  powers 
and  privileges  granted  in  this  convention  by  the  Republic 


20!^  The  Panama  Tolls  Controversy 

of  Panama  to  the  United  States,  the  Government  of  the 
United  States  agrees  to  pay  to  the  Republic  of  Panama  the 
sum  of  ten  million  dollars  ($10,000,000)  in  gold  coin  of  the 
United  States  on  the  exchange  of  the  ratification  of  this 
convention  and  also  an  annual  payment  during  the  life 
of  this  convention  of  two  hundred  and  fifty  thousand 
dollars  ($250,000)  in  like  gold  coin,  beginning  nine  years 
after  the  date  aforesaid. 

The  provisions  of  this  article  shall  be  in  addition  to 
all  other  benefits  assured  to  the  Republic  of  Panama  under 
this  convention. 

But  no  delay  or  difference  of  opinion  under  this  article 
or  any  other  provisions  of  this  treaty  shall  afiFect  or  in- 
terrupt the  full  operation  and  effect  of  this  convention 
in  all  other  respects. 

ARTICLE  XV 

The  joint  commission  referred  to  in  Article  VI  shall 
be  established  as  follows : 

The  President  of  the  United  States  shall  nominate 
two  persons  and  the  President  of  the  Republic  of  Panama 
shall  nominate  two  persons  and  they  shall  proceed  to  a 
decision;  but  in  case  of  disagreement  of  the  commission 
(by  reason  of  their  being  equally  divided  in  conclusion)  an 
umpire  shall  be  appointed  by  the  two  Governments,  who 
shall  render  the  decision.  In  the  event  of  the  death,  ab- 
sence or  incapacity  of  a  commissioner  or  umpire,  or  of 
his  omitting,  declining  or  ceasing  to  act,  his  place  shall  be 
filled  by  the  appointment  of  another  person  in  the  manner 
above  indicated.  All  decisions  by  a  majority  of  the  com- 
mission or  by  the  umpire  shall  be  final. 


Treaty  with  Panama  20S 

ARTICLE  XVI 

The  two  Governments  shall  make  adequate  provision 
by  future  agreement  for  the  pursuit,  capture,  imprison- 
ment, detention  and  delivery  within  said  zone  and  auxiliary' 
lands  to  the  authorities  of  the  Rejjuhlic  of  Panama  of 
persons  charged  with  the  commitment  of  crimes,  felonies 
or  misdemeanors  without  said  zone  and  for  the  pursuit, 
capture,  imprisonment,  detention  and  dehvery  without 
said  zone  to  the  authorities  of  the  United  States  of  jjcrsons 
charged  with  the  commitment  of  crimes,  felonies  and 
misdemeanors  within  said  zone  and  auxiliary  lands. 

ARTICLE  XVII 

The  Republic  of  Panama  grants  to  the  United  States 
the  use  of  all  the  ports  of  the  Republic  open  to  commerce 
as  places  of  refuge  for  any  vessels  employed  in  the  canal 
enterprise,  and  for  all  vessels  passing  or  bound  to  pass 
through  the  canal  which  may  be  in  distress  and  be  driven 
to  seek  refuge  in  said  ports.  Such  vessels  shall  be  exempt 
from  anchorage  and  tonnage  dues  on  the  part  of  the 
Repubhc  of  Panama. 

ARTICLE  XVIII 

The  canal,  when  constructed,  and  the  entrances 
thereto  shall  be  neutral  in  perpetuity,  and  shall  be  opened 
upon  the  terms  provided  for  by  Section  1  of  Article  III 
of,  and  in  conformity  with  all  the  stipulations  of,  the  treaty 
entered  into  by  the  Governments  of  the  U'nited  States 
and  Great  Britain  on  November  18,  1901. 


204  The  Panama  Tolls  Controversy 

ARTICLE  XIX 

The  Government  of  the  Republic  of  Panama  shall 
have  the  right  to  transport  over  the  canal  its  vessels  and 
its  troops  and  munitions  of  war  in  such  vessels  at  all  times 
without  paying  charges  of  any  kind.  The  exemption  is 
to  be  extended  to  the  auxiliary  railway  for  the  transporta- 
tion of  persons  in  the  service  of  the  Republic  of  Panama, 
or  of  the  police  force  charged  with  the  preservation  of 
public  order  outside  of  said  zone,  as  well  as  to  their 
baggage,  munitions  of  war  and  supplies. 

ARTICLE  XX 

If  by  \artue  of  any  existing  treaty  in  relation  to  the 
territory  of  the  Isthmus  of  Panama,  whereof  the  obliga- 
tions shall  descend  or  be  assumed  by  the  Republic  of  Pan- 
ama, there  may  be  any  privilege  or  concession  in  favor 
of  the  Government  or  the  citizens  and  subjects  of  a  third 
power  relative  to  an  interoceanic  means  of  communication 
which  in  any  of  its  terms  may  be  incompatible  with  the 
terms  of  the  present  convention,  the  Republic  of  Panama 
agrees  to  cancel  or  modify  such  treaty  in  due  form,  for 
which  purpose  it  shall  give  to  the  said  third  power  the 
requisite  notification  within  the  term  of  four  months  from 
the  date  of  the  present  convention,  and  in  case  the  existing 
treaty  contains  no  clause  permitting  its  modifications  or 
annulment,  the  Republic  of  Panama  agrees  to  procure  its 
modifications  or  annulment  in  such  form  that  there  shall 
not  exist  any  conflict  with  the  stipulations  of  the  present 
convention. 


Treaty  with   Pannma  i05 

ARTICLE  XXI 

The  rights  and  privileges  granted  by  the  Republic 
of  Panama  to  the  United  States  in  the  preceding  articles 
are  understood  to  be  free  of  all  anterior  debts,  liens,  trusts 
or  liabilities,  or  concessions  or  privileges  to  other  Govern- 
ments, corporations,  syndicates  or  individuals,  and  con- 
sequently, if  there  should  arise  any  claims  on  account  of 
the  present  concessions  and  privileges  or  otherwise,  the 
claimants  shall  resort  to  the  Government  of  the  Republic 
of  Panama  and  not  to  the  United  States  for  any  indemnity 
or  compromise  which  may  be  required. 

ARTICLE  XXII 

The  Republic  of  Panama  renounces  and  grants  to 
the  United  States  the  participation  to  which  it  might  be 
entitled  in  the  future  earnings  of  the  canal  under  Article 
XV  of  the  concessionary  contract  with  Lucien  N.  B.  Wyse, 
now  owned  by  the  New  Panama  Canal  Company,  and  any 
and  all  other  rights  or  claims  of  a  pecuniary  nature  arising 
under  or  relating  to  said  concession,  or  arising  under  or 
relating  to  the  concessions  to  the  Panama  Railroad  Com- 
pany or  any  extension  or  modification  thereof;  and  it 
likewise  renounces,  confirms  and  grants  to  the  l.'nited 
States,  now  and  hereafter,  all  the  rights  and  property 
reserved  in  the  said  concessions  which  otherwise  would 
belong  to  Panama  at  or  before  the  expiration  of  the  terms 
of  ninety-nine  years  of  the  concessions  granted  to  or  held 
by  the  above-mentioned  party  and  companies,  and  all 
right,  title  and  interest  which  it  now  has  or  may  hereafter 
have,  in  and  to  the  lands,  canal,  works,  property  and 


•206  The  Panama    Tolls  Controversy 

rights  held  by  the  said  companies  under  said  concessions 
or  otherwise,  and  acquired  or  to  be  acquired  by  the  United 
States  from  or  through  the  New  Panama  Canal  Company, 
including  any  property  and  rights  which  might  or  may  in 
the  future  either  by  lapse  of  time,  forfeiture  or  otherwise, 
revert  to  the  Republic  of  Panama  under  any  contracts  or 
concessions,  with  said  Wyse,  the  Universal  Panama  Canal 
Company,  the  Panama  Railroad  Company  and  the  New 
Panama  Canal  Company. 

The  aforesaid  rights  and  property  shall  be  and  are 
free  and  released  from  any  present  or  reversionary  interest 
in  or  claims  of  Panama  and  the  title  of  the  United  States 
thereto  upon  consummation  of  the  contemplated  purchase 
by  the  United  States  from  the  New  Panama  Canal  Com- 
pany, shall  be  absolute,  so  far  as  concerns  the  Republic 
of  Panama,  excepting  always  the  rights  of  the  Republic 
specifically  secured  under  this  treaty. 

ARTICLE  XXIII 

If  it  should  become  necessary  at  any  time  to  employ 
armed  forces  for  the  safety  or  protection  of  the  canal,  or 
of  the  ships  that  make  use  of  the  same,  or  the  railways  and 
auxiliary  works,  the  United  States  shall  have  the  right, 
at  all  times  and  in  its  discretion,  to  use  its  police  and  its 
land  and  naval  forces  or  to  establish  fortifications  for  these 
purposes. 

ARTICLE  XXIV 

No  change  either  in  the  Government  or  in  the  laws 
and  treaties  of  the  Republic  of  Panama  shall,  without  the 


Treaty  irifh   Panama  ifff 

consent  of  the  United  States,  atfecl  any  ri<,'ht  of  llu-  luilod 
States  under  the  present  convention,  or  under  any  treaty 
stipulation  between  the  two  countries  that  now  exists  or 
may  hereafter  exist  touching  the  subject  matter  of  this 
convention. 

If  the  RepubUc  of  Panama  shall  hereafter  enter  as  a 
constituent  into  any  other  Government  or  into  any  union 
or  confederation  of  States,  so  as  to  merge  her  sovereignty 
or  independence  in  such  Government,  union  or  confedera- 
tion, the  rights  of  the  United  States  under  this  convention 
shall  not  be  in  any  respect  lessened  or  impaired. 

ARTICLE  XXV 

For  the  better  performance  of  the  engagements  of 
this  convention  and  to  the  end  of  the  efficient  protection 
of  the  canal  and  the  preservation  of  its  neutrality,  the  Gov- 
ernment of  the  Republic  of  Panama  will  sell  or  lease  to  the 
United  States  lands  adequate  and  necessary  for  naval 
or  coaling  stations  on  the  Pacific  coast  and  on  the  western 
Caribbean  coast  of  the  Republic  at  certain  points  to  be 
agreed  upon  with  the  President  of  the  United  States. 

ARTICLE  XXVI 

This  convention  when  signed  by  the  plenipotentiaries 
of  the  contracting  parties  shall  be  ratified  by  the  respective 
Governments  and  the  ratifications  shall  be  exchanged  at 
Washington  at  the  earliest  date  possible. 

In  faith  whereof  the  respective  plenipotentiaries  have 
signed  the  present  convention  in  duplicate  and  have 
hereunto  affixed  their  respective  seals. 


208  The  Panama  Tolls  Controversy 

Done  at  the  city  of  Washington  the  eighteenth  day 
of  November,  in  the  year  of  our  Lord  nineteen  hundred 
and  three. 

John  Hay.  (seal.) 

BUNAU-VARILLA.    (SEAL.). 


1 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE. 


FFJi     11939 


re:.  CIR.    DEC  17  IS 


APR  281967  7  6 


1    M2E 


MAY  0  6  2007 


■  O&N  DFPT 


Trara 


-&^ 


APR  2  01970   3  8 


JUL 


OCI  1719705  s 


OTSflt 


BFO'OLD    ^^i^y^TpHi4: 


JAN  ]  3  1976  ri^  " 


LD  21-95m-7,'37 


CDMlfiDMbMV 


^ 


